TCU analyzes the concession of Highway BR 364/365 (GO/MG)

On May 15, 2019, the Brazilian Federal Audit Court (TCU) issued a ruling containing its conclusions regarding the modeling of the future concession of Highway BR 364/365 (GO/MG), to be tendered by the National Ground Transportation Agency (ANTT). The highway, located between the cities of Jataí (Goiás state) and Uberlândia (Minas Gerais state), is of strategic importance as it connects surrounding agribusiness areas and the concession is expected to contribute to a greater integration of the Brazilian logistics network.

Despite ANTT’s cooperation with the TCU and the carrying out of a public consultation, the TCU raised concerns regarding the modeling of the project, making recommendations and requiring adjustments. Ultimately, the TCU commended ANTT and the Ministry of Infrastructure for their work and approved the modeling, but required them to submit additional information and to demonstrate compliance with the TCU’s decision and recommendations prior to the official launch of the public tender.

The TCU’s request for adjustments and additional information involves mainly the following aspects:

  1. the need for broader mechanisms to ensure transparency and social control in the public services rendered;
  2. inconsistencies with TCU recommendations regarding the last highway concession awarded by the Federal Government (Rodovia de Integração do Sul – RIS Highway), pursuant to TCU Decision 1,174/2018, specifically regarding unanticipated new investments;
  3. extension of and inconsistencies with contractual term periods;
  4. investment amortization criteria;
  5. the need to improve certain aspects of feasibility studies;
  6. lack of provision on amicable termination of the concession; and
  7. lack of motivation for changes in the highway route, priority public works and for the definition of investments and operational costs.

In addition, the TCU recommended that ANTT review provisions for term extensions and collateral warranty. The TCU pointed out that the current performance bond model could create barriers to its enforcement by ANTT, which has occurred in existing highway concessions with similar modeling. The TCU therefore recommended that ANTT analyze the possibility of establishing different collateral warranties for each material obligation under the concession agreement. Since this is a recommendation, ANTT can still reject it.

In view of the TCU’s conclusions, the tender will most likely be postponed to after the initial estimate (2Q19).