Privatising Brazil's airports: Fasten your seat belts WHEN the winning bid for the privatisation of Guarulhos, São Paulo's main international airport, was read out on February 6th, the crowd at the city's stock exchange gasped. At 16.2 billion reais ($9.4 billion), it was nearly 4 billion reais more than the second-highest bid, and 12.8 billion reais above the government-specified minimum. On offer was 51% of a public-private partnership with Infraero, Brazil's lumbering state-owned operator. The partnership will have to pay the sum in inflation-linked instalments over 20 years, and also give the government 10% of its turnover. From what is left, money will have to be found for investment of more than 4.5 billion reais fixing up decrepit, overcrowded terminals. A third of that sum must be spent before hordes of football fans arrive for the 2014 World Cup. Controlling stakes in two more of Infraero's 66 airports were also on offer. Viracopos, 100km from São Paulo, needs huge investment to cope with overflow from Guarulhos, which has no room to grow. Brasília's airport is to be expanded as a hub for domestic flights. All told, the government pocketed a cool 24.5 billion reais. Some 30% of the country's air passengers and 57% of its air cargo pass through the three airports. They should be gold mines. Passenger numbers in Brazil have doubled in a decade and hectic growth is expected to continue. Since Infraero is heavily overstaffed and travellers have few opportunities to spend money, costs can be slashed and revenues raised. Even so, the winning bid for Guarulhos astonished Eduardo Padilha of Insper, a business school. "They must have plans that no one else has thought of, maybe hotels and conference centres," he says doubtfully. Sceptics have wondered if the price was so high because the government was dealing with itself. The consortium that won Guarulhos was led by the pension funds of Petrobras, a giant oil company, and Banco do Brasil, the country's biggest bank. Both firms are state-controlled. And BNDES, the state development bank, will finance the deal. However, the pension funds are independently managed, and the consortium also includes ACSA, a private South African airport operator. Corporación América, from Argentina, and Egis, a French firm with airports in Africa, will run Brasília and Viracopos respectively. If the operators are indeed purely profit-seeking, then the size of their bid brings the government risks as well as rewards. First, they could plead poverty and demand easier terms in future. Such renegotiating is common in Latin America, and Corporación América has managed it in Argentina before. A bigger worry, says André Castellini of Bain & Company, a consultancy, is that travellers will bear the burden of the inflated bids. "The regulator will have to strike a balance between the guys who paid 25 billion reais and want a return, and the passengers who want a better service at a reasonable price," he says. Since Brazil has only privatised one small airport so far, the government has little experience in handling such trade-offs. More sales are expected soon. Wagner Bittencourt, the minister for aviation, announced on February 8th that plans to auction two more airports are already under way. In the 1990s a centrist government offloaded energy, telecoms and mining firms. But its left-wing successors stopped privatisations. Only the prospect of complete collapse during the World Cup forced a change of heart, says Mr Castellini. Brazil is creaking at the seams. With public investment low, private money is needed to upgrade not just airports but roads and ports as well. The hope is that a successful airport privatisation will tempt the government to further pragmatism.