A Philippines-based company, International Container Terminal Services (ICTSI), won the public tender to build and operate the container terminal for 30-years. The agreement was signed on March 2001 and the container terminal began operations three months later. ICTSI offered minimum lease payments of close to R$340 million or USD175 million (NPV during the concession period) equivalent to a 244 percent premium over the minimum lease amount of R$100 million (USD51.5 million). At the time, this was a record premium for Brazilian port privatizations. Between 2001 and 2007, ICTSI invested approximately US$80 million in human resources, information technology, equipment, sheds and patios for storing general cargo and containers.
The investments resulted in an increasing and continuous flow of container cargo. Brazil’s 1993 Port Modernization Law initiated major reforms to increase the competitiveness and efficiency of Brazilian ports. The government of Pernambuco sought to make Suape a container hub that would attract trans-shipment cargo. For years, northeast Brazil had experienced above average economic growth. Trans-shipments offered Suape an opportunity to leverage this economic development and capturea larger share of the containerised trade that originates in or is destined for locations within the region. Suape is Pernambuco’s most important port, strategically located at the intersection of the main commercial long-haul routes linking the eastern coast of South America to other continents, as well as routes connecting Brazil’s north and south regions.
The port was established in 1978 as an integral part of an industrial development zone. It comprises 13,500 hectares, and is located 40 km south of Recife, the state capital. In 1997, the state and federal governments financed a major infrastructure investment program to build the infrastructure needed for a deep draught regional hub. In 2000, Suape decided to launch an international bid to award a concession to develop a container terminal. The transaction was structured as a 30-year non-renewable concession with clear requirements regarding the level of service quality and the transfer of assets back to the state at the end of the contract. The lessee was obliged to secure financing, procure and install equipment, and operate the terminal as a common user container terminal open to all carriers, operators and cargo consignees. Since trans-shipment tariffs are generally market driven, there were no limits on tariff
rates. Of the nine groups that prequalified, three presented proposals: ICTSI of Philippines, Consorcio Sotes (composed of Grupo Dragados, JCPM and Agunsa), and the Port of Barcelona. ICTSI presented the highest commercial proposal of R$340 million (USD175 million), equivalent to a
244 percent premium over the minimum lease price of R$100 million (USD51.5 million). At the time, this was a record premium for Brazilian port privatizations. The company’s expected investments totalled R$548.2 million (US$282 million), with an additional R$200 million (US$103 million) for infrastructure. ICTSI indicated that it would develop the port as a trans-shipment hub for the northeastern region and expects to be shipping over half a million TEU annually by the
end of the concession period in 2031.
The post-tender results included the following:
• US$80 million in investments between 2001 and 2008.
• In 2006, SUAPE was certified as one of the safest ports in the country.
• SUAPE earned ISO 9001/2000 certification in 2004, and ISO 14001/2004
certification in 2005.
• Annual movement capacity increased from 75,000 to 400,000 containers
in seven years, well above forecasted scenarios.
• Infrastructure is designed to reach an annual throughput of 1.5
million TEU by 2031, as opposed to the 400 thousand TEU that were
initially forecast.