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Monday, 01 February 2016

Real devaluation sets up Brazilian ports for multi-million dollar foreign investment deals

Just as the Special Ports Ministry (SEP) in Brazil releases details for Round Two of the “Great Brazilian port sell-off” - worth Reais1.766 billion (US$429.14 million), one experienced commentator declares that current exchange rates make these concessions very attractive to foreign investors.

Joao Emilio Freire, the executive director of Comissão Portus, which represents most of the port associations and shippers and industry groups in Brazil, said that he strongly believed the rapid fall in the value of the Real, the Brazilian currency, in relation to the US dollar and a basket of other foreign currencies presents a “very good opportunity” for international investors.

He told Port Finance International: “It is most certainly a tremendous time to invest in Brazil as our prices have dropped by a third. This mess that we have today – in politics and with the economy – has gone on for a while but will not last for that much longer. Foreign companies based in countries with low interest rates have a golden opportunity here, no matter who is in office in Brasilia, because it is so much cheaper now to invest in our ports’ infrastructure.”

Indeed, the Real has devalued from 2.2 Reais to the US dollar in April of 2014, to 3.1 Reais in April of 2015 today’s 4.1 Reais to the dollar, making it twice as cheap for American companies to invest in Brazil. With the Pound sterling the Real has fallen from 3.7 Reais to the Pound (April 2014), to 4.5 Reais to £1 in April 2015 and then to today’s 5.8 Reais to the Pound Sterling, and it has befallen a similar fate with various other foreign currencies.

This now makes Brazilian exports – such as beef, chicken, coffee, sugar, fruits, iron ore, etc - very cheap and it makes investing in Brazil twice as cheap! “We all know in Brazil that the only way out of our current economic predicament is to export and that means that we must improve the infrastructure of our ports, from where nearly all our goods are exported,” added Freire, who will be presenting a paper at the PFI Brazil Conference to be held in Rio de Janeiro on March 2 & 3.

Another factor speeding along the concession process in Brazil is the fact the Brazilian government desperately needs money, with the economy nose-diving and tax receipts down. That is why it eventually opted for the “highest bidder” form of auctioning off new concessions and why Round Two will take place at the Sao Paulo bourse (Bovespa) on March 31.

At least six new concessions will go under the hammer in Sao Paulo, with all of them from the state of Para: two at the port of Santarem, three in Belem and one in Vila do Conde, which was postponed from the first round owing to a lack of interest.

Helder Barbalho, the minister in charge of SEP, has promised thee will be no such lack of interest for this second and subsequent round and he is certainly confident that the second round of port sell-offs will be fruitful and bolster Brasilia’s coffers.

He said: "We have made several improvements to the concession process from the first round and we are confident now that we will have we will have complete success in all the areas that are being auctioned off. I think this time that there will be a lot of competition."

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