Port, sewage, telecom, railway auctions raise debate on competition rules.
Brazil’s infrastructure sector is experiencing a wave of scrutiny over market concentration and competition rules in public tenders. This debate has been gaining momentum, according to legal experts and industry players. The most contentious case currently involves the upcoming auction for Tecon Santos 10, a major container terminal at the Port of Santos, São Paulo. But similar concerns are surfacing across other segments, including public-private partnerships (PPPs) for sewage services, mobile network capacity offerings, and railway concessions.
In Santos, tensions escalated after the National Waterway Transport Agency (ANTAQ) ruled that no container operator already active in the port could participate in the first phase of the Tecon 10 auction. These companies would only be allowed to bid if no other parties show interest, a scenario deemed highly unlikely.
The main critics of this restriction are Maersk and MSC, which jointly operate the Brasil Terminal Portuário (BTP). Sources say both groups are eyeing Tecon 10 as a means of dissolving their joint venture at BTP. On the other side, new entrants into the Santos port area support the restriction and have indicated they may legally challenge the auction if Maersk and MSC are cleared to participate.
In the sanitation sector, competition-related concerns gained prominence last year when Sanepar (the Paraná Sanitation Company) held auctions for three sewage PPPs. The bidding rules barred any single group from winning all contracts, a move intended to prevent Aegea, already operating a PPP in the state, from dominating the market. Although Aegea obtained a provisional ruling from the Federal Supreme Court (STF) halting the auctions for four months, the ruling was later overturned.
The same clause has been included in two Espírito Santo PPP auctions conducted on Tuesday (17), prompting new objections from Aegea during the administrative process. However, sources say the company ultimately chose not to take legal action this time. Aegea submitted a bid in partnership with Acciona and GS Inima.
In telecommunications, the National Telecommunications Agency (ANATEL) is preparing a new auction this year for 700 MHz fourth-generation (4G) mobile spectrum. It will be the third attempt to curb excessive capacity concentration among the major carriers—Vivo, Claro, and TIM.
The 700 MHz band was first auctioned in 2014, when four blocks were offered and only Oi opted out. In 2021, the remaining block was reoffered during the fifth-generation (5G) auction, but the three incumbents were barred from the initial bidding round.
That time, the winner was Winity Telecom, owned by investment firm Pátria. However, two years later, the company returned the spectrum, citing a lack of interest. The pullback came after ANATEL imposed stringent competition-related conditions, given that Winity had signed a deal to lease capacity to Vivo, one of the three companies barred from the auction.
“We’ll offer it to the market again. The auction model hasn’t been defined yet, but during the public consultation phase, a proposal was made to preserve the spirit of the previous tender,”
ANATEL President Carlos Baigorri told Valor.
In railways, market players expect similar discussions to resurface. Sources say VLI has already expressed concerns to the government about a possible competitive advantage held by Rumo in the upcoming auction for the West-Central Integration Railway (FICO), which connects to the North-South Railway segment operated by Cosan’s logistics company. Any new entrant would have to pay a track access fee to Rumo.
VLI believes, sources say, that Brazil’s rail network is becoming increasingly biased toward the South, given Rumo’s dominance. The company is advocating for greater public investment in the FICO project to make it financially viable for other bidders. So far, no formal challenge has been filed.
In a statement, VLI said it “reaffirms the importance of a more balanced and competitive logistics system at the national level” and that “new structuring projects should prioritize efficient flows to better balance the national rail network.”
Legal experts note a growing emphasis on antitrust enforcement in infrastructure auctions.
“Back in the 1990s, when Brazil began its privatization program, sectors without regulatory agencies tended to impose participation restrictions directly in the bid terms. When the agencies proliferated, the system shifted to ex-post [after-the-fact] control,” said Rafael Vanzella, partner at Machado Meyer. “Now it seems we’re going back to the 1990s model. But it’s too early to say if this is a broader trend.”
Rodrigo Bertoccelli, a partner at Giamundo Neto Advogados, also sees rising debate. “Economies of scale have traditionally led to market concentration. What’s new is the emergence of ex-ante [preemptive] rules aiming to diversify competition,” he said. While pre-auction analysis by regulators is legitimate, Mr. Bertoccelli warns that the methodology used for such evaluations is likely to be contested.
Another specialist interviewed by Valor argued that Brazil’s current pipeline of infrastructure assets offers a “huge opportunity” for market concentration among a few economic groups. In his view, this has not gone unnoticed by market participants.
“In the short term, contracting projects without examining competitors’ market positions might seem like a bargain. But over the medium and long term, it ends up being more expensive due to high levels of concentration,”
he said.
He added that public officials are learning to navigate the apparent ‘cognitive dissonance’ in promoting competition while imposing participation restrictions on certain groups.
Source: Valor International
