Port Privatization: What Model?

São Paulo – The auction that will transfer the Companhia Docas do Espírito Santo (Codesa) to private initiative is scheduled for the first semester of 2022 and will be carried out in two parts, adopting a hybrid model. In other words, the company’s control will be sold (privatization), and the operation of the ports of Vitória and Barra do Riacho will be granted for 35 years (concession). According to the National Secretariat of Ports and Waterway Transportation (SNPTA), this type of management should serve as a model for the country’s other ports. At first glance, there’s nothing against it, but what raises eyebrows is adopting a port like Vitória as a model, which ranks 10th among the main Brazilian ports and represented only 1.57% of the total cargo movement in the country in 2020, according to data from the National Waterway Transportation Agency (Antaq). During that period, that port handled about 3.57 million tons of cargo. On the other hand, the port of Santos, which has always topped the list of ports with the highest cargo movements in the country, only in the first semester of 2020, according to Antaq, handled 65.9 million tons of goods, more than double that of the second-ranked port (Paranaguá, PR), representing 29.8% of the total movement. Obviously, the problems that occur in a small port like Vitória are incomparable to those that exist in a port like Santos. This means that adopting a model that may succeed in Vitória does not necessarily have to work in a port like Santos, the most important in Latin America and already operating as a port hub (concentrating cargo and shipping lines). Therefore, it is with great concern that businessmen and workers who traditionally operate in Santos view the movement in favor of privatizing the Santos Port Authority, the new name for the former Companhia Docas do Estado de São Paulo (Codesp). This is because privatization is not a cure-all for all ills. If not executed properly, it can create even greater problems than those faced so far with state management. One of these problems is the possibility that the winning companies of the auction and concessions may become major players, meaning they may operate so significantly in the market in which they are involved that they occupy all spaces, condemning smaller companies to disappear, which would certainly also mean a reduction in jobs. In this case, to make matters worse, those affected would have nowhere to turn, as with privatization, the government is obligated to stay away, and as a result, there will be no control mechanisms to prevent or combat potential monopolies. Another problem that the privatization process does not seem to be taking into account is the high incidence of taxes that goods passing through the port of Santos end up receiving. Because this issue is not part of the privatization. However, in this case, government action is needed because this high tax burden is leading many importers to opt for imports through ports such as Paranaguá, Itajaí, and Rio Grande in the South or even in the Northeast, where taxes are not so burdensome. While this decentralization may not be without benefits, it represents a kind of “time bomb” for the economy of Baixada Santista. Therefore, in the name of an equitable economic policy, there should be, above all, a broad national agreement to put an end to the so-called “fiscal war,” which occurs not only among states but also among municipalities, often using benefits related to the Tax on Services (ISS). Although this practice may seem to favor taxpayers at first glance, in practice, the “fiscal war” among states distorts the collection of the Tax on Circulation of Goods and Services (ICMS) because exporting states indirectly transfer part of the burden of the incentives they practice to importing states of taxed products and services.

---

Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Institutional Relations Manager of the Fiorde Group, composed of Fiorde International Logistics, FTA Transport, and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: fiorde.com.br

Return to Blog