Seaports are key pieces underpinning the Brazilian economy. They act as gateways through which companies export goods and import products – something the Brazilian economy seriously needs. So government officials are now trying to use the ports to jumpstart their stagnant economy.
The government is considering whether to extend the minimum length of contracts that transfer operating rights for the shipping terminals to private sector entities. The goal is to extend the minimum length of these port concessions from 20 years to 35 years – almost doubling the contract term. The problem, however, is that any such modification will change the Port Law of 2013.
According to the Journal of Commerce, government officials are reportedly open to the extension. After all, the change could generate additional port investments and revenue. One study cited by Port Strategy suggests that easing restrictions on port investments could result in $7.2 billion in new investments. The additional cash would also clear the way for spending on dredging and other infrastructure work needed in the ports. That work was supposed to be the responsibility of the Brazilian state governments, but they have struggled to secure the financing necessary to pay for it.
The shipping industry is eagerly watching the news for any developments. While the jury is still out on what would happen with those companies that have existing contracts, new businesses are eager to benefit from the law if enacted. If the change is made, expect a sudden and dramatic increase in foreign investment as companies seek to take advantage of the longer contracts.
At the moment, the decision on how to proceed rests with President Michel Temer, Minister for Transport, Ports, and Civil Aviation Maurício Quintella, and Home Affairs Minister Eliseu Padilha. All three are expected to make a decision on the changes shortly.
Once a decision is made, the big question will be how to make the change and what will happen to current contracts. While Brazilian officials are eager to find ways to spark economic growth, ultimately they must work within Brazil’s legal framework. Changing Brazil’s Port Law may sound like a great idea and the perfect way to capture new foreign investment, but it will require a bit of legal maneuvering if it is to succeed.
