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Brazil court recommends a two-stage auction for the mega Santos terminal as a blow to Maersk

The Brazilian Federal Audit Court (TCU), voting six to three, recommended that operators of existing container terminals in the Santos Port be banned from participating 'in the first stage of bidding for the planned mega terminal.

This decision is a blow for companies like Danish shipping group Maersk and MSC, which already operate container terminals at the largest port in Latin America. These companies can only enter the second phase of auction if they do not receive any?valid bids.

The two-phased model proposed by Antaq, the port regulator, and challenged in court by Maersk, could be beneficial to 'new entrants in Asia, or even JBS meatpacking companies, who entered the shipping industry?last year, as operators of a Santa Catarina container terminal.

The Brazilian government expects that the Tecon 10 winner will invest more than 6 billion reais over a period of 25 years and increase container handling capacity at Santos to 50%. This will reduce?logistical bottlenecks.

"Accepting this proposal increases the chances of an independent operator entering the port and reduces the risks that one operator controls the terminal," Augusto Nardes said, a TCU court member.

Maersk stated that the TCU's decisions disregard technical studies performed by various Brazilian government agencies. It added that this "significantly reduces" the potential of the project in Latin America's biggest port.

International Container Terminal Services (International Container Terminal Services), a Philippine-based operator of 33 terminals for container handling in different countries, has welcomed the TCU's decision.

In a press release, it stated that "this is a well-known and traditional model in the infrastructure industry which encourages the effective entry of a?new player into the Port Santos".

The TCU recommendation that the auction be scheduled by the Ministry?of?Ports was not unanimous.

Benjamin Zymler defended a different model in which the winner would have to sell assets if he or she was already an operator at Santos.

Cristina Machado said that excluding current operators from the first stage of the auction would violate the principle of competitive bidding. $1 = 5.4298 Reais (Additional reporting by Luciana Magnhaes; Writing by Ana Mano, Editing by Himani Sakar)

(source: Reuters)