Ports: Relevant changes in Brazil
The revolution in the Brazilian infrastructure regulatory framework has brought another important change, this time in connection with the development and operation of the nation’s ports.
Aimed at encouraging private investment in the expansion and modernization of the ports and fostering competition in the sector, President Dilma enacted Provisory Measure # 595, dated December 6, 2012, that provides for the opportunity for private parties to develop and operate private terminals, handling both their own and third parties’ cargos as so-called “mixed-use” terminals. The previous requirement that private terminal operators handled third parties’ cargo only on a subsidiary basis, in an accessory and secondary manner vis-à-vis their own cargo, no longer applies since the 1993 Ports Act has now been revoked.
The operation of public ports (porto organizado) through concessions or leasing agreements (as regards the operation of private terminals inside public ports) continues to be subject to a public bidding process, while the operation of private terminals outside public ports will undergo authorization procedures. Authorizations will be granted to companies in positions to carry-out such activities at their own risk and in accordance with the procedures set forth in applicable law. The Provisory Measure has also created other classifications for ports operations, such as small public ports, tourism terminals and river harbors, subject to authorization procedures.
With respect to the operation of new public ports and terminals inside public ports subject to a public bidding process, the lower tariffs offered, combined with the higher capacity to handle cargo, will be the main criteria for assessment – the Federal Government will not require pecuniary offers as part of public bidding procedures. The period of a concession or a leasing agreement will be for 25 years, renewable for one successive 25-year period, whilst the assets will revert to the State at the end of the concession or the leasing agreement pursuant to a typical BOT (Build, Own and Transfer) structure.
The provision of public services is subject to certain specific rules, such as (i) the obligation to render the services in a continuous and efficient manner; (ii) the duty of charging the lowest possible tariffs, provided that they ensure adequate compensation for the supply of the public services (including the amortization of the investments made in connection with the services); and (iii) the obligation of providing the services to a broad range of users. It is important to note, however, that these rules will not apply in their entirety to private terminals outside public ports, where interested parties submit their projects to the regulatory agency (ANTAQ – Agência Nacional de Transportes Acquaviários). In this event, the projects will be subject to authorization procedures and the restriction on successive renewals or requirement for tariffs stipulated by ANTAQ shall not apply.
The authorizations and related agreements for “Mixed Use” terminals that have been handling their own and third parties’ cargo will be adapted to comply with the new rules within one year. With regard to terminals currently being explored under leasing agreements within public ports, these will remain valid through to the end of their terms, but once expired will be subject to public bids – if the agreements have already expired, ANTAQ will carry out the public bid within 180 days of the publication of the Provisory Measure. The majority of such terminals were granted to private parties before 1993 (when the old Ports Act was enacted).
The Government has simultaneously announced the concession of three new terminals: Águas Profundas (Espírito Santo State), Manaus (Amazon State) and Porto Sul (Bahia State), as well as of another two already in operation Imbituba (Santa Catarina State) and Ilhéus (Bahia State).
Another relevant change brought about by Decree # 7861/12 has been the creation of an administrative authority designed to modernize and propose best practices to overcome the intricate bureaucracy involving customs, tax and public health authorities that oversee the typical activities carried out at public ports (CONAPORTOS – Comissão Nacional das Autoridades nos Portos). The Government has announced heavy investments in the dredging of canals and access to ports, including changes in the regulation of the profession of ship maneuvering (práticos) in order to increase the number of professionals available.
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This alert has an informative character and does not constitute legal or tax advice.