Olympics not enough to boost Brazilian assets

In contrast with other Latin American countries, a persistently poor economic climate and a shrinking GDP will continue to drive down the performance of most of Brazil’s infrastructure assets for the rest of 2016, Fitch said in a note.

“Although fans, media and athletes have begun to arrive in Brazil for the Olympics, we expect declines in demand for air travel and other transportation assets to remain for the rest of 2016 due to the rise in unemployment and decline in consumer confidence,” the ratings agency said on Friday, the same day the opening ceremony for the 2016 Rio Games was scheduled to take place.

According to numerous reports, ticket sales for the 2016 Games are lagging compared with recent Olympics, while hotel and flight bookings are also lower than expected.

Fitch noted that all six of Brazil’s privatised airports are negotiating with regulators extensions for the payment of concession fees that were due in June and July. “That helped prevent a liquidity squeeze but does not change our negative outlook on these airports,” Fitch wrote.

Passenger volumes and airport traffic could increase slightly if the economy manages even a weak recovery in 2017.

The outlook and data for Brazil are in sharp contrast with other Latin American countries, such as Mexico, Chile and Colombia, whose toll roads Fitch expects will experience “robust” traffic volumes for the remainder of 2016.

“We also expect their performance will benefit from their strategic locations in areas with favourable demographics and their maturity (which means toll revenues are generally more stable),” the ratings agency said.

As for other infrastructure sub-sectors, such as power, energy and social infrastructure, Fitch expects these projects will finish 2016 “near their historical performance levels,” throughout Latin America. It was unclear whether Brazil is among those markets. A spokesperson for the agency had not responded to a request for comment at press time.