Cablegate: Brazil: Airport Administrator Infraero Meeting

DE RUEHBR #1160 2461222
R 021222Z SEP 08



E.O. 12958:N/A
SUBJECT: BRAZIL: Airport Administrator INFRAERO Meeting

1. (SBU) SUMMARY: In a meeting between Ambassador Sobel and the
head of INFRAERO, Sergio Guadenzi, Guadenzi provided a brief
overview of civil aviation administration in Brazil, discussed
airport profitability and privatization proposals, reviewed cargo
infrastructure, and noted a decision on Guarulhos airport parking
fees should not be expected before November. Guadenzi will be in
Boston September 21-24 for the world conference of airport
administrators. END SUMMARY.

2. (SBU) Guadenzi reviewed that INFRAERO is responsible for airport
infrastructure, including runways, aprons, cargo, and passenger and
cargo loading/unloading. ANAC is the regulatory agency responsible
for airline oversight and slot allocation. DECEA is responsible for
air traffic control. The Secretary of Civil Aviation at the
Ministry of Defense coordinates the work of these three agencies.
Guadenzi mentioned that there is occasionally some internal
discussion that perhaps INFRAERO should shift from Ministry of
Defense to Ministry of Transportation, given its focus on transport
infrastructure, but these discussions have resulted in nothing

3. (SBU) On airport privatization, Guadenzi indicated that there
remains a great deal of intra-governmental disagreement on the best
way to proceed. Some suggest creating a state-owned company to
administer airports, but opening up 40 to 49 percent of shares to
the private sector. Other parts of the government believe
straightforward privatization is optimal. (NOTE: Brazil has about
120 total airports; INFRAERO runs 67 of these. Most of the
non-INFRAERO airports are quite small. Some are administered by
state governments, five or six operate under concession, and a few
are (such as one in Bahia attached to a hotel) privately owned).
Complicating privatization consideration, Guadenzi underlined, is
the reality that, of the 67 airports INFRAERO administers in Brazil,
only 12 to 15 are profitable. Brazil subsidizes operations at the
loss airports with revenue from the ones that generate profit.
INFRAERO does not want the profitable ones to find buyers while
INFRAERO would have to continue to operate the money-losers. He
referenced the public calls from the governor of Rio de Janeiro to
privatize Rio's international airport, which is an unattractive
option from the federal perspective.

4. (SBU) Guadenzi noted that BNDES is studying various
privatization models for government consideration. He suspected
BNDES's final recommendation would depend on Embraer's
recommendation. (NOTE: In a separate meeting with BNDES, the bank
indicated it had already forwarded preliminary studies six months
ago to Ministry of Defense and had received no reaction/policy
direction to date, impeding further BNDES progress on developing
these proposals. END NOTE). INFRAERO has looked independently at
airport administration in other countries, concluding there are four
basic viable models - federal administration, state/county
administration, state-owned company administration, and concessions.
Guadenzi added GOB is unlikely to make any decision this year, or
indeed have an internal proposal for consideration before the end of
the year.

5. (SBU) Turning to the Guarulhos parking fees proposal, ANAC is
still evaluating the best way to proceed and no decision is expected
before November. Guadenzi commented that Sao Paulo has a planning
problem more than an infrastructure problem that needs to be
addressed. Further complicating INFRAERO attempts to make
infrastructure improvements, the Federal Accounting Court (TCU) just
stopped work on four airports that had been approved by the PAC
board. Using reference prices non-specific to runway specifications
(eg, for cement), TCU declared contract prices too high and issued a
work suspension. INFRAERO developed and sent TCU a month ago
airport-specification reference prices (using US and EU price
comparisons), but TCU has not approved yet. Meanwhile, work can not

6. (U) On cargo, Guadenzi noted the largest cargo terminals are
Campinas, Guarulhos, and either Rio or Manuas. In response to the
Ambassador's question, Guadenzi acknowledged that Brasilia has the
space to take more cargo (with two runways, good equipment, and a
light flight schedule 11 am to 5 pm and none at night), but the lack
of business located in Brasilia leaves these resources fallow.

7. COMMENT: The Ambassador was interested in exploring expanding
cargo operations in Brasilia further and suggested INFRAERO may want
to reach out to companies such as DHL, Federal Express, UPS and
others to discuss the potential for hub operations. Guadenzi noted
ANAC, who assigns slots, would need to be part of any conversation.
The meeting also confirmed that final proposals on airport parking
fees and on possible airport privatization are not imminent. END


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