Arteris

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Industry Overview

In Brazil, 61% of cargo and 90% of passenger movement takes place on the country’s highways.  Of the total of 214,400 kilometers of paved roads in the country, 19,100 kilometers are managed by concessionaires (9%), with a total volume of traffic, in 2013, of 1.6 billion vehicles, according to figures compiled by the Brazilian Association of Highway Concessionaires (ABCR).

There were more than 80 million vehicles in Brazil in 2014, with more than half (55%) of that total composed of automobiles, 26% motorcycles and 1% trucks, according to data released by the Ministry of Cities.  

The participation of private capital is extremely important to meeting the country’s infrastructure needs. According to the CNT Highway Survey, conducted by the National Transportation Confederation in 2014, the difference in the quality of highways under federal or state jurisdiction and those under concession is rather significant. In relation to the overall state of the roadways, only 6% of the portion under public management was considered great and 28%, good. In relation to the overall state of the portions under concession, the stretches considered to be great and good were 48% and 39%, respectively.

The expansion of the economy provides a double benefit to the highway concession market: the growth in industrial production increases the traffic of freight vehicles, while the increase in salaries encourages tourism on the highways and increases the collection of tolls.  The growth of agribusiness is also positively impacting this market, as it is an important user of the highway system.

Arteris is directly affected by the overall economic conditions in Brazil and the evolution of its business is generally related to the state of the Brazilian economy, particularly the variations in Gross Domestic Product (GDP), inflation rates, interest rates, government policies and tax policies. 

History of the Regulatory Framework

The primary motivation behind the Brazilian concession program was preventing the deterioration of the main intra-state and inter-state road networks in the early 1990s and promoting the growth of the highway network by attracting private investments into the sector. The lack of public resources to restore, maintain and expand the highway network existing at the time directly threatened the economic growth of the country, due to its importance with respect to the transport of goods and the provision of services in Brazil.

In this context, based on Article 175 of the Constitution of the Federative Republic of Brazil (Federal Constitution) a wide-ranging process of granting concessions at the federal level began. Between 1993 and 1994, the DNER opened the first rounds of bidding for highway concessions. In 1995, the Brazilian Congress approved and the Brazilian President signed Law no. 8987, of February 13, 1995, which covers the concession regime and provides permission for the provision of public services.

The enactment of this law established the regulatory framework for public concessions in Brazil. Following the initial steps, the promulgation of Law no. 9277, of May 10, 1996, authorized the Federal Government to delegate the management and operation of specific federal highways to the states, municipalities and Federal District of Brazil, which became subject to concession.

 Between 1997 and 1998, the states of São Paulo, Paraná and Rio Grande do Sul began their own highway concession programs. In 2001, through Law no. 10223, of June 5, 2001, the Federal Government began a restructuring process of the transportation industry through the creation of new entities:   

  • CONIT, with the power to propose to the Office of the President national policies for the integration of the modes of transport of people and goods;
  • ANTT, responsible for the implementation of policies established by CONIT and for the regulation and supervision of the activities related to the provision of highway transportation services;
  • DNIT, responsible for implementing the policy formulated for the management of the infrastructure of the Federal Traffic System.

In 2003, the DNER ceased to exist and the SNIT and ANTT assumed its responsibilities, with the former acting in the regulation, granting and supervision of the highway concessions and the latter managing, among other things, highway construction, maintenance and expansion projects.

Regulatory agencies were also created at the state level to establish guidelines for the granting of concessions. In the state of São Paulo, Complementary State Law no. 914, of January 14, 2002, led to the creation of ARTESP, a special municipal agency connected to the State Transportation Secretariat, responsible for monitoring the activities of the Concessionaires. This statute establishes that the government of the state of São Paulo is the granting authority for the provision of public transportation services and transfers the responsibility for the formal granting, regulation and monitoring of those services to ARTESP. As such, ARTESP assumed the powers, privileges and duties of the granting authorities with respect to the management and oversight of the contracts and terms of the concessions for the provision of public transportation services already in place at the time of its establishment.

1993 Passing of Law 8.666 establishing concession contracts and bidding processes.
1993 Launch of federal highway concession program.
1996 Law 9.277 authorizes federal government to delegate to states and municipalities the management and operation of certain federal highways.
1997/8 States of São Paulo, Paraná and Rio Grande do Sul conduct their own highway concession programs.
2001 Launch of restucturing process in the transportation sector by the federal government, creating CONIT, ANTT and DNIT.
2002 Creation of São Paulo Public Transportation Services Regulatory Agency (ARTESP).
2003 Dissolution of DNER; DNIT and ANTT assume respectively highway construction/maintenance projects and the regulation, granting and supervision of concessions.
2013 Resolution of Artesp and ANTT about the marginal cash flow to enable new investments on the existing concession contracts.

There are currently approximately 19,100 kilometers of highways under private concession.

 The table below shows the current status of the existing highway concessions in Brazil:

Federal Concession Programs
   # of contracts Kilometers
1st Round 6 1,474
2nd Round (Phase I) 7 2,621
2nd Round (Phase II) 4 681
3rd Round (Phase II) 1 476
3rd Round (Phase III) 6 4,873
Total 24 10,125
State, Municipal and PPPs Concession Programs
   # of contracts Kilometers
State of São Paulo 20 5,412
State of Paraná 6 2,474
State of RJ/ BA/ ES/ MG/PE 6 1,071
Total 32 8,957
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