The government of Sao Paulo, Brazil has announced a freeze on all toll road rates effective until July 2014 in a move that will affect some 19 road concessions throughout the state.
Governor Geraldo Alckmin sought to disconnect the decision from the ongoing public protests sweeping Brazil – and which originated, in large part, due to high transportation costs in Sao Paulo – by saying the move “is not a populist measure. We have been working on this problem for the past two years”.
Alckmin suggested the freeze on tolls was partly a “penalty” that concessionaires would now pay in response to delays in the execution of investments required in the original concession contracts.
Spanish toll road operator Abertis, which runs four road concessions in Sao Paulo out of a total of nine across Brazil, said the toll freeze was counterbalanced by the announcement of several measures that will help to economically rebalance the affected concessions.
“The initiative by the state of proposing compensation measures highlights the strength of the regulatory framework in Brazil,” Abertis said in a regulatory filing, pointing out that the company “does not expect any economic impact on the value of its concessions in Brazil”.
Abertis added that it “considers that the current context offers the possibility of negotiating improvements in the concession contracts which will allow both the authorities to meet their objectives and Abertis to continue generating value for its shareholders”.
Since June 11, at least one million Brazilians have taken to the streets to protest against a shopping list of grievances taking in everything from political corruption, the high cost of hosting two world-class sporting events in 2014 and 2016, and poor infrastructure and services, among other things.
Brazilian President Dilma Roussef has tried to appease protesters with promises of reform, but her efforts have so far been unsuccessful.
Abertis bet big on Brazil last year via its partnership with Canada’s Brookfield Asset Management. The joint venture went on to acquire over 3,000 kilometres of road in Brazil from Spanish developer OHL – a deal which crowned Abertis the world’s largest toll road operator, according to the firm.