Santos corruption sting fuels Brazil port privatization push

Santos corruption sting fuels Brazil port privatization push

Port of Santos.

The port of Santos. Photo credit: The port of Santos.

The plan by the incoming Brazilian administration to continue an effort to privatize port authorities has received a new injection of momentum after the head of the port authority of Santos, the largest South American port, was arrested earlier this week. What privatization should look like and how it should begin is still being debated, though.

Brazil’s President-elect, Jair Bolsonaro, is putting together a government team and declaring various policy intentions, including the privatization of all the port authorities Companhias Docas (CDC), or dock companies, in Brazilian parlance. Various business groups including the Federation of Industries for the state of São Paulo (Fiesp), the most powerful shipper group in Brazil, back the effort to privatize port management, aiming to cut inefficiencies and alleged corruption.

Privatization backers are pointing to the arrest of José Alex Oliva, the president of Companhia Docas do Estado de São Paulo (Codesp) and two other Codesp directors, and federal charges of corruption of evidence of the latter. The investigation alleged Oliva; Cleveland Sampaio Lofrano, the marketing and community relations director; and Gabriel Nogueira Eufrasio, the legal superintendent, engaged in fraudulent tendering of contract for dredging, information technology, and consultancy for a total of 37 million reais ($9.9 million).     

Jose Alex Oliva. Photo credit: Rob Ward.

The arrests have refueled debate as to what type of port management system should replace the existing one, and how to start the process of privatization. The Bolsonaro administration, which wants to cut the number of federal departments from 29 to 17 when it takes office in January, shouldn’t begin port authority privatization with Santos, said Marcelo Procopio, the commercial director for DP World Santos.

Instead, the process should begin with a smaller port and adjust the model as needed before expanding to larger ports, he said. Outgoing president Michel Temer has already put in process a plan to privatize Codesa, the port authority for the much smaller port of Vitoria. The port, whose container operations are run by Log-In Logistica, the last remaining Brazilian-owned container line, handled about 100,000 TEU last year.

“We will see much better management with privatization. Resources will then go to the right place and instead of politicians that sit on the CDC boards for four years we will have professionals,” he said.

Procopio, who has also served as commercial director for Libra Terminais and Sepetiba Tecon, said less government interference in how ports are run will spur faster decision-making and the tendering of bids.

Seeking a port with the right size

Vitoria might be “too small and also atypical” of many Brazilian ports and although Santos might be too big for a “first effort in privatization,” there are other more suitable ports, said Joao Emilio Freire Filho, a consultant for Rio de Janeiro-based MA Consultoria e Eventos. Other than the Vila Velha terminal, there are few facilities that have enough cargo to draw bids from respectable companies, said Friere, who was until recently head of the Commissao Portus, a confederation of Brazilian port associations and shipper and industry groups.

“If this experiment fails, my fear would be that people will then blame the model rather than the particular failure,” he said, adding that the ports of Paranagua and Rio Grande, both slated to handle about 800,000 TEU this year, would be better places to start with privatization.

The investigation and arrest of the Codesp officials, dubbed Operation Triton, is the latest in a series of alleged corruption over the past decades. More high-profile port authority board members from other port boards are expected to be named and arrested over the coming weeks, according to sources at the port of Santos and in Brasilia.

Temer was implicated earlier this year in a federal police investigation alleging he gave Rodrimar port terminal in Santos a concession extension despite a pre-1993 contract prohibiting such action. Incidents smacking of corruptions have increased in recent years, a veteran Santos shipping agent told JOC.com

“I think with Judge [Sergio] Moro [an investigator that has levied corruption charges on politicians and industrialists] joining Bolsonaro’s government we will see a lot more ‘cleansing’ of corrupt institutions,” he said.

Keeping to his push for more “technicos” instead of “politicos,” Bolsonaro, who was elected president Oct. 28, has appointed Luiz Fernando Garcia to fill the spot left by Oliva.

Bolsonaro’s campaign against port corruption couldn’t come soon enough, Freire said.

“I believe he will try to privatize all the state-owned companies and will probably remodel the last ports law [of 2015]. It is refreshing that he seems to be coming down very heavily on all the monkey business that has been going on in the port administrations. This will improve things for everybody,” he said.

Overall, there will inevitably be a great deal of lobbying in Brasilia between now and January as the various sectors try and influence the incoming administration.

Contact Rob Ward at rcward788@btinternet.com.