SBU South America

ROADIS South America is responsible for asset management and growth in this region. In 2017, VIABAHIA, the concessionaire that manages two of the most important highways crossing the state of Bahia, in Brazil, completed its 8th year as the toll road operator responsible for 681 km along the BR-324 and the BR-116. Significant milestones have been achieved this year, with great plans and a promising future ahead.

Some highlights in 2017 include:
• Construction of the Paraguaçu Bridge in Brazil.
• 15% reduction in fatalities compared to 2016.
• Volunteer program which saw more than 544 hours of volunteer work go into communities living near the roads administered by VIABAHIA.

Our team was successful in entering the Five-Year Review process with the National Land Transport Agency (ANTT)—the federal agency responsible for regulating the concession agreement. VIABAHIA was the first highway concessionaire in Brazil to enter this process. This review is a contractual mechanism developed with the intention of adjusting the contract and its investment plan for future works to the current needs of users and the communities adjacent to our highways, focusing on traffic flow and user comfort and safety.

Achieving these objectives would not have been possible without our fantastic group of collaborators and partners, who have worked hard to provide the best services to the users that put their trust in our highways.

Throughout 2018, we will continue working with dedication and commitment in the quest to consolidate ourselves as a national benchmark in road management, based on best practices and ethics, governance and sustainability.

We are sure that our whole team will continue to contribute to attaining new goals and learning with great dedication and pride, making 2018 another year marked by excellence.

The Brazilian economy is showing signs of recovery. Analysts expect GDP to grow throughout 2018. This dynamic indicates that the overall economic environment will remain favorable, despite some uncertainty about the ability of the government to be elected for the 2019-2022 mandate to reverse the severe fiscal imbalance of recent years and maintain conditions that are favorable to the whole economy.

Also, investments are expected to rise in 2018 as a reflection of the expansion of credit to companies, reversing the decline seen in 2017, and the rise in business confidence. The contribution of government spending to the GDP will most likely be zero after several years of contraction.

It’s a fact that there are strong indicators of recovery in the Brazilian economy, such as the increase in industrial production, improvements in indices related to business activity, inflation rates close to the target, which will be revised from 4.5% to 4.0% in the next two years, and the Ibovespa index returning to levels not seen since before the financial crisis of 2008.

The road sector in Brazil is the main logistics system in the country with a network of 1,610,076 kilometers of national roads and highways (fourth largest in the world), transporting 56% of all cargo in Brazil. This highway network is the main means of cargo and passenger transportation.

Brazil is one of the world’s biggest markets for the automobile industry and around 10,000 kilometers of its road system is composed of highways, mainly in the state of São Paulo. However, around 30% of the entire Brazilian road network is badly damaged due to a lack of maintenance, and only 13% is paved.

The density of the paved road network in Brazil is still very small, especially when compared to other countries of a similar size. The country was ranked 111th in the World Economic Forum Global Competitiveness Report for quality of roads. A total of 138 countries were analyzed, and in South America Brazil was ranked behind Chile (30th place), Uruguay (98th) and Argentina (103rd).

In summary, to describe the current state of the infrastructure sector in Brazil, it is important to highlight the low supply of credit for infrastructure projects, uncertainties surrounding the large national construction groups and the country’s sovereign risk as perceived by foreign investors. All of these factors have limited a more significant recovery in the toll road market, which has already been penalized by contracts with overly optimistic terms, which the Brazilian government has been working on providing a solution to. The proposal of MP [Provisional Measure] 752/2016, now approved and converted into Law 13,448/2017, which sets terms for the amicable return of projects that are in difficulty, and MP 800/2017, the so-called “MP das Rodovias”, are evidence of this effort to solve the existing bottlenecks.

In addition, Brazil is seeking measures to encourage private investment—both domestic and foreign—in infrastructure by offering fiscal incentives. Until now the main incentives have been REIDI, which grants exemption from the PIS/COFINS charge; and the SUDENE tax benefit, which decreases the tax base by 75% for the purposes of estimating income tax. SUDENE only applies in the north and northeast of Brazil.