Entry barriers in the Brazilian bus market: A contractual prospect

Abstract

Brazil has a long tradition of considering its urban bus systems as a public service. Almost a quarter of the Brazilian population rely only on them to perform daily activities. In 2015 urban transport was guaranteed as a fundamental social right in the Federal constitution, putting it in the same level of importance as public health and education. The Brazilian legislation establishes that the concession for private firms to provide public services is subject to competitive bidding criteria and must be regulated by a contract. This paper aims to identify entry barriers that are embedded in the concession contracts from the biggest cities in Brazil. Firstly, a literature review about the main entry barriers in the urban bus section was conducted. Subsequently, the eight most significant Brazilian contracts were compared and discussed vis-à-vis to the review findings. We concluded that all contracts considered in this study had aspects that gave local operators a substantial advantage in the bidding processes. Long term contracts, private depot ownership and tight deadlines to prepare the proposals contributed to driving out newcomers. Future competitive tendering procedures should seek to overcome these shortfalls as a way to reopen the market and promote fair competition among bidders.