“We will fight until the end,” says Swiss company that may be excluded from the Santos port auction

Patricio Junior, 64, director of terminal investments at TiL (Terminal Investment Limited), attended the Federal Court of Accounts (TCU) session on Monday (8) fully aware of what the outcome would be. The prevailing thesis was that the Tecon 10 auction — the mega container terminal at the Port of Santos — should occur in two phases. In the first phase, all shipowners would be excluded, a position even more restrictive than the one presented by Antaq (the National Waterway Transport Agency).

The federal agency wanted only shipowners that already own terminals in Santos to be barred from the first round. According to Antaq, the goal is to avoid market concentration.

Both scenarios, however, run counter to MSC’s interests. TiL is the arm of the Swiss group responsible for container terminal operations.

The company is a partner, alongside Maersk, in BTP, a major terminal in Santos. With around 850 vessels in operation, MSC accounts for 20% of global container movement.

Excluded from the auction (based on the TCU recommendation), the multinational is holding on to the possibility that the Brazilian government may treat the court’s recommendation as optional — a scenario that contradicts the position of several court ministers. Any divergence could further complicate the concession of an asset expected to handle 50% of cargo in Brazil’s main port.

If there is no alternative, Patricio Junior says the natural path will be to go to court. He argues that there are plenty of grounds for doing so. The risk, he says, is ending up with an auction restricted to very few companies.

“We are fighting until the end, my friend. They’re not even letting us compete,” he says.

How did MSC receive the TCU’s recommendation for a two-phase auction with restrictions on shipowners?

“This is a very important asset for Brazil — and for Santos, importers, and exporters. We cannot afford to make mistakes. On Monday (8), six votes supported the restriction and three opposed it. The three votes in favor of free competition were highly technical, based on facts and data. They were extremely strong votes. As for the six votes supporting the restriction, aside from the reviewing minister [Bruno Dantas], all were political.

“At no point during the session was it proven that our participation is illegal. On the contrary, the TCU’s Public Prosecutor’s Office supports free competition, and the Ministry of Finance supports free competition. We are a company with 25 years in Brazil. If you check our record, it’s spotless. Our three votes were worth 30; the six were political.”

But the TCU’s recommendation is more restrictive than Antaq’s. According to the court, no shipowner can participate.

“But it’s a recommendation, isn’t it? And there were no facts or data to support it. Soon, you end up steering the auction toward someone — and that must be avoided. The more open the process, the cleaner it is. The more obscure it becomes, the worse for Brazil.

“Brazil, through Mercosur, is negotiating an agreement with Europe. And then the government may prohibit Danish companies [Maersk] or Swiss companies [MSC] from participating in the auction of the country’s most important port terminal, without any technical justification. What is the problem with allowing everyone to compete? In Tecon 10, you would eliminate the three largest container operators in the world. Why? There is no technical basis for this.”

Do you believe the process is being steered toward a specific company?

“It’s becoming too closed. It would be irresponsible of me to say so explicitly because I believe that, until proven otherwise, everyone is innocent. I don’t believe Antaq acted in bad faith by choosing this restriction — it was a choice. I don’t believe the six ministers who voted for the restriction acted in bad faith, either. They are extremely respected individuals.”

Does this open the door to legal action?

“We must avoid this as much as possible, but there will be no other option if the government does not take a stance and affirm that the TCU’s suggestions are merely recommendations, not state policy. Who manages the country is the Executive.”

But isn’t the process already in court?

“Maersk has filed a challenge, and it is ongoing. MSC has not yet. And Minister Zymler raised several inconsistencies regarding procedures that were not followed. It was never discussed in a public hearing that shipowners would be barred. Why did this appear now? What is the impact? No study was conducted on this. The reviewing minister did not provide justification for supporting this part. But legal action will only occur after the auction notice is published.”

Do you believe the federal government might reject the TCU recommendation?

“Anything that hasn’t happened yet can happen. The government may follow the TCU or may choose an open model, favorable to foreign capital. The government is certainly observing all of this.”

TCU ministers argue that if the government adopts a model different from the TCU or Antaq recommendations, the issue would return to the court, possibly resulting in an injunction that halts the auction. Could this delay the process for much longer?

“I don’t believe the TCU will put Brazil and Santos at risk just to defend a point that is not illegal, merely controversial. The TCU has an administrative — not judicial — role.”

The Port of Santos is considered excessively concentrated and vertically integrated. Wouldn’t this worsen if an incumbent operator wins?

“A few months ago, CADE analyzed CMA CGM’s attempt to acquire Santos Brasil. They found no irregularities. Mathematically, all port operators can operate anywhere. MSC controls 20% of global container capacity today and will reach 25%. One in every five container ships belongs to MSC. There is no excessive concentration. Why are there only three airlines in Brazil? Do they control the market? No. The market is simply not large enough for more players. In the U.S., there are nine or ten shipping lines because the market is bigger — it’s proportional.”

So you believe that when the auction takes place at B3, MSC will submit a bid?

“I cannot think otherwise. We are fighting until the end, my friend. First, we follow the procedural steps; then, if necessary, the legal steps. As Baron de Coubertin said, the important thing is to compete with honesty, firmness, and fairness. In the case of Tecon 10, they’re not even letting us compete.”

PROFILE:

Patricio Junior, 64, holds a degree in Nautical Sciences from the Merchant Marine Academy. He has an MBA in finance and port management. He also completed executive development at IMD in Lausanne, Switzerland, and terminal management at Lloyd’s Maritime Academy in England. He is chairman of the Board of Directors at Portonave S.A. in Santa Catarina, Brazil, and at IPM (Infraestructura Portuaria Mexicana) in Mexico.

Source: Folha de São Paulo

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