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Event Promoted by FGV Transportes on July 21, 2020 Addresses Topics on Ports, Privatization, and Future Perspectives for the Market
The privatization of sectors in Brazil in recent years has garnered significant repercussions and speculation from citizens, presenting both pros and cons. The possibility of privatization has not been limited to education, health, and security, but also includes the port sector. The webinar organized by FGV, moderated by Marcus Quintella, Coordinator of FGV TRANSPORTES, and Clythio Buggenhout, Director of Government Relations at Cargill and President of the Board of the Brazilian Association of Port Terminals – ABTP, discussed the initiative for the privatization of Brazilian ports, aiming to close speculations and present measurable expectations with industry professionals for the market.
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The invited speakers presented their expectations and concerns regarding the topic of the webinar, including: Fábio Abrahão, Director of Infrastructure, Concessions, and PPPs at BNDES – Patricia Lascosque, Superintendent of Ports at Suzano and President of the Association of Private Port Terminals – ATP, and Ricardo Arten, CEO of Brasil Terminal Portuário – BTP.
Considering privatization brings us to the question of a government’s competence in a country, and regarding Brazil, there are risks of alienation and uncertainty about privatization under governmental control. This is similar to what currently happens in some private ports that suffer from significant political intervention.
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Brazil, which has always had strong public power in education, health, and security, has shown itself to be weakened after several crises, and despite privatization being a path taken by neighboring countries. In fact, there are doubts about whether this strategy is the best solution for Brazil. However, we cannot be deluded when looking at the economies of other countries, as economic strategy is not based on copy-and-paste.
The truth is that there are many other administrative and cultural issues that shape a country in its entirety. Moreover, it is not only the national culture that differentiates the progress of the same strategy applied by different agencies; regional and business cultures also stimulate productivity or the lack thereof.
EXPECTATIONS FOR THE PRIVATIZATION OF THE PORT SECTOR
Privatization opens doors for economic development with efficient and effective solutions that detach from the four pillars of administration currently applied by the Brazilian government in the ports, as presented by the speaker of the webinar conducted in partnership with FGV, Ricardo Arten, CEO of Brasil Terminal Portuário – BTP:
1. Legal Security – The strategy begins in a certain way, and along the way, the specifications are altered, leading to the dismissal of the Business Case.
2. Bureaucracy – There is bureaucracy even for making investments, requiring authorization for everything, with licenses that take years to be approved.
3. Excessive Regulation – Regulation is imposed on all processes with agencies making decisions contrary to the same subject. In other words, a clear and objective rule for decision-making is often lacking.
4. Price Control – The ideal business strategy, confirmed by the Central Bank, is for prices to be regulated by the market and not by agencies or government.
THE ROLE OF THE GOVERNMENT REGARDING THE ADMINISTRATION OF BRAZILIAN PORTS ACCORDING TO FGV
The government’s role in the administration of ports currently focuses on legal security rather than long-term investment aimed at attracting shipowners and increasing cabotage. This legal insecurity prevents the port sector from participating effectively in the economic market. Without the correct investments, the ports cannot acquire the necessary potential to compete, stand out, and grow.
With the complete privatization of ports, administrative power will be decentralized, with each port having its needs and potentials addressed effectively and without the excessive bureaucratization present in public administration.
Based on what was presented by Fábio Abrahão, Director of Infrastructure, Concessions, and PPPs at BNDES, there is no ideal model for legal security. Furthermore, privatization seeks to resolve the bureaucratic bottleneck, where the main business is the provision of infrastructure services at the lowest cost, thus achieving efficiency.
INITIATIVE FOR THE PRIVATIZATION OF PORTS ACCORDING TO FGV
The market considers that port operations in our country are already privatized due to Law 8.630/1993, despite the lack of a policy for restructuring the sector that could include complete application of the Law and its restructuring associated with social, economic, regional, and sustainability aspects.
The initiative for the privatization of Brazilian ports aims to find a better management contract, with negotiations at market price blocking business abuses and proposing progressive activity in privatization. In the end, it prevents an economic and administrative regression by the government.
However, the main concern in the discussion of port privatization is the effectiveness of implementation, as it will need to be analyzed to what extent the government can intervene in the processes of private companies, in addition to the need for a lifetime contract preventing governmental and political changes from interfering with privatization.
“…if we are counting on a period of 3 years or 4 years, if there is any risk of ideological, political, or philosophical discontinuity, we will have spent 4 years discussing here, a business without any effectiveness, without objective improvement in the current management…”
Clythio Buggenhout
Currently, there are ports that are already privatized but report to the government for quality management, safety, among other processes. According to the president of TPC, Patricia Lacosque, excessive bureaucracy and legal insecurity hinder economic progression. This is all true even with ports being managed by private companies.
“…there is a lot of governmental interference, from government control agencies that want to regulate the level of service that I provide for myself… there are a series of interferences and rigidity that for private entities is very heavy in Brazilian regulation, and this also needs to be addressed. So if the solution is to privatize the terminals altogether, great! But if this level of control, regulation, and bureaucracy continues to exist, we will still not be able to be competitive”
Patricia Lacosque
WHAT IS THE LANDLORD MODEL MENTIONED BY FGV SPECIALISTS?
The LandLord Port is a model of port management adopted by the Brazilian government for the exploration of its port system. In this model, the port infrastructure is provided by the state, and the private sector is responsible for supplying superstructure and conducting port operations through leases (concessions).
In Brazil, the adopted model is the landlord port. In this model, the port authority is performed by the public power, which acts as a regulatory body and also as the owner of the port. Operations, such as cargo handling, are carried out by private entities, which can operate at that port through concession. The companies that receive the right to commercially explore the port are required to invest in superstructure and equipment.
Another model is the Tool Port, where the port authority is public and responsible for the port infrastructure, superstructure, and machinery. The operations are handled by port operators who pay a fee to be able to explore the port.
Finally, it is worth noting that the privatization of port administration is not a practice recommended by the World Bank. For the international organization, port management should seek not only profit but also regional development and the growth of the country. Sérgio Aquino, president of the National Federation of Port Operators (Fenop), spoke with Portogente about the Development and Zoning Plan (PDZ) for the Port of Santos and warned that the best way is legislative modernization concerning bureaucracy, emphasizing that good public administration is sufficient to achieve good results.
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