International Forum Debates Dredging at Port of Santos
The Brazilian port sector weighs in on a privatization model for the Port of Santos at an international forum, held in Santos, Brazil. Photo by Léo Siqueira.
Policy makers, authorities and port executives gathered in Santos to discuss alternatives to boost the competitiveness of Latin America’s busiest port
By LÉO SIQUEIRA
Hundreds of attendees gathered from September 11 to 12 in the city of Santos, Brazil, to discuss alternatives to boost the competitiveness of Latin America’s busiest port.
The port of Santos, which handles nearly 30 percent of the country’s total exports, has struggled to keep dredging, following delayed contracts and legal disputes involving Brazil’s EEL Infraestruturas and more recently a consortium made up of Van Oord and Boskalis.
Brazil’s EEL Infraestruturas won a public tendering of BRL 369 million ($116.36 million USD) to deepen the port’s entrance channels and berths. The public tendering was opened in July 2015, but EEL Infraestruturas was only able to sign a deal in April 2016.
Despite securing a contract, EEL failed to present the guarantees required by the Brazilian government in order to perform the project.
Designed to start in October 2014, dredging was expected to deepen the port’s channel and the berths’ access bays to between 15.4 and 15.7 meters (about 50.5 and 51.5 feet) over a period of three years.
Despite signing a contract, EEL couldn’t prove it had a strong enough financial structure to carry out the project. It tried to present three different guarantees, all of which were rejected by the country’s Secretariat of Ports (SEP), which is now extinct.
Even so, EEL still had the chance to prove it could assume the project. But it didn’t. Until recently, dredging contracts at the massive port have been broken up into segments, all of which have rescission clauses.
More recently, in February this year, the Brazilian Ministry of Transports, Ports and Civil Aviation awarded the capital and maintenance dredging of the Port of Santos to a JV formed by Van Oord and Boskalis for a total of BRL 369 million ($116.36 million US). Van Oord already had a contract to dredge the port’s berth areas in the sections 1, 2, 3 and 4, but the deal expired on October 15 last year.
But a new legal setback has put more pressure over the already delayed dredging project.
More recently, a Brazilian court determined EEL should assume the project awarded to the Van Oord, Boskalis JV.
Meanwhile, state-owned port operator Codesp opened a separate competitive bidding in July 2016 to keep the port’s depth near 15 meters (about 49.2 feet), which was won by Dragabras Serviços de Dragagem.
The Codesp dredging contract is provisional and aims to keep the port’s depth at certain levels until the government contract is solved.
“It’s the government who will say how dredging will be. Our contract will be renewed in October 10 for a further one year until there’s a new (definite) contract by the Brazilian Ministry of Transports, Ports and Civil Aviation,” Alex Oliva, president at Codesp, told International Dredging Review (IDR) in the sidelines of the Santos Export Forum event.
Santos Export 2017, an international forum focused on Latin America’s busiest port, took place September 11 to 12.
NEED FOR DREDGING: PRIVATIZATION MODEL
In July this year, the port’s draft declined from 13.2 to 12.3 meters, reducing the ability of certain vessels to dock and causing losses for port operators, which estimate that each centimeter of reduced draft equals about eight containers that can’t be loaded.
As a way to solve the dredging issues that have affected the facility in the past few years, proponents of the Santos Forum Export discussed a privatization model for dredging at the port of Santos.
During the event, a Brazil government representative said the country has established a multi-ministry working group to evaluate the best privatization model for dredging at the port.
Brazil’s office of chief staff, the ministry of transports, ports and civil aviation, port authority Antaq, as well as the attorney general’s office (AGU) will be part of the working group.
“Old problems require new solutions,” said Ogarito Borgias Linhares, concessions director at Brazil’s secretariat of ports, during a panel.
During the panels, proponents signaled the Brazilian government could either release a concession tender or award the needed dredging works to a local consortium called Santos17.
The so-called Santos17 is a port-related group that sent a proposal to the government to create a consortium to manage dredging at the port.
Under the proposal of Santos17, a special-purpose entity (SPE) would be established to manage all dredging. It would be made up of port operators. The Brazilian port sector has nicknamed the proposal as the “condominium” model.
“I think the idea is viable for the port of Santos,” Codesp’s president, Alex Oliva, said in the sidelines of the Santos Forum Export event.
“We need to study it carefully. It could be a specific solution (for the port of Santos), but it may not be suitable for all ports,” Oliva said.
During the event, the Brazilian and the port sector have broadly welcomed the proposal.
Luís Felipe Valerim Pinheiro, director of the infrastructure department of the São Paulo industrial trade association Fiesp, said the concession model offers more legal security.
“The condominium model is an avenue that needs to be built. It is a model where we can share costs, but not necessarily a concession activity. If it is not possible, we can have the concession model. It has maturity and offers legal security for 10, 15 and eventually 20 years,” Pinheiro said, while discussing the challenges for both models: the condominium proposal and the concession model.
In the same discussion panel, Antaq’s director, Mário Povia, said the concession model for dredging at the port of Santos was “inefficient.”
“It is a process full of bureaucracy. We need a tender, and after that it may face legal barriers, and works can stop due to environmental issues. We are in a moment when Brazil is discussing its Program for Partnership in Investment (PPI), so it is more than adequate to discuss this model,” Povia said.
But dredging isn’t the only concern for the port of Santos.
Paulo Barbosa, the mayor of Santos, said governments should jointly work at all levels to ensure Latin America’s busiest port remains competitive. “City, state and federal governments should work together,” he said.
A government decree was announced at the forum to create a working group for discussing the privatization of dredging at the Port of Santos. Details on the working group were expected in October, but not available at press time