The Special Secretariat of Ports' goal to include the economic exploitation of fairways in public ports in the Ministry of Planning's comprehensive concession programme has begun to take shape. As the Dredging Programme II has been determined to be insufficient in maintaining and increasing the depths of Brazilian ports, the Special Secretariat of Ports launched a public consultation in this regard. The consultation was open from March to May 2015. The attractiveness of concessions will largely depend on the federal government's decisions.

It is possible to remunerate concessionaires exclusively through the fees paid by users (eg, shipowners, cargo owners and offshore support companies (Law 8,897/1995)), and by establishing public-private partnerships (Law 11,079/2004), with the possibility of public partners' contributions helping to keep tariffs low. Some have advocated an alternative to this method: establishing a special purpose entity between lessees and port operators which would be responsible for delegating channel maintenance. This would not be a concession and would be a legally innovative model.

Delegation may include not only the maintenance and deepening of channel depths, but also signalling, beaconing and bathymetric tests. Contractual terms will vary. The method of payment will determine the profitability of projects. Fees would still be collected from users; however, it is paramount that the upcoming model does not bring additional costs to port users. Further, the rate of return will coincide with the associated risks. Efficient tools for adjustment and tariff revision are necessary to maintain a financial balance throughout the contract period.

Another key issue is the allocation of risks. In the case of dredging, projects may be subject to currency, inflationary and regulatory risks, strikes and demand concerns. Public-private partnerships provide the most efficient division of risks between partners, while traditional concession is usually at the concessionaire's risk. However, any public procurement can be implemented with an equal allocation of risks.

Other aspects must be considered in order to attract concessionaires. With some vessels already carrying nearly 20,000 containers – almost double the capacity of Brazilian ports – greater port depths will facilitate greater movement and increased competitiveness. Thus, much is at stake in relation to the creation of a model that allows significant investment in Brazilian fairways. Recent failures in Dredging Programme II bid processes indicate that market players will not take part in projects involving dubious profitability and unmeasured risks.

For further information on this topic please contact Godofredo Mendes Vianna or José Augusto Dias de Castro at Kincaid | Mendes Vianna Advogados by telephone (+55 21 2276 6200) or email (godofredo@kincaid.com.br or jose.castro@kincaid.com.br). The Kincaid | Mendes Vianna Advogados website can be accessed at www.kincaid.com.br.

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