The Federal Court of Accounts in Brazil has approved a debated two-phase auction model for Tecon Santos 10, the largest container terminal planned in the country. This decision aims to prioritize regulatory independence while also addressing competition issues in the port industry.

The court concluded its decision with a 6-to-3 vote, supporting the National Agency for Waterway Transportation's role in organizing the bidding process. However, it also suggested stricter measures to prevent major shipping companies from consolidating their power in the sector.

The main question was whether the court should interfere in regulatory decisions or trust the expertise of the transportation agency. Minister Bruno Dantas, who reviewed the case, shared the common opinion, stating that "just disagreeing with the regulatory merit does not mean it's illegal."

This ruling allows the auction to move forward, but current operators are restricted from participating in the first phase. They can join in the second phase if there are no valid bids from new companies. The court also recommended that this restriction focus on shipowners instead of all current operators to avoid limiting competition through vertical integration.

This decision is a challenge for existing terminal operators, including Maersk's APM Terminals, Mediterranean Shipping Company (MSC)’s TIL, and CMA CGM. Maersk highlighted that Brazil has great potential for consolidating hub ports, which could triple container transshipment and lower maritime transport costs by about 13% by 2030.

Minister Augusto Nardes pointed out the urgent need for competition, mentioning that Santos is experiencing issues with vertical integration, where shipping companies own terminals. He regarded the two-phase model as "the most appropriate and balanced solution for the public interest," and he added that remedies after the auction, like selling off assets, tend to be "fragile, slow, and hard to monitor."

The terminal represents a substantial investment of over 5 billion reais (around USD 2.76 billion) and is expected to increase Santos' container-handling capacity by up to 50%. Technical evaluations have deemed the container market "highly concentrated," pointing out problems such as port call omissions, which rose from 2% to 21% at one major terminal.

TCU President Minister Vital do Rêgo emphasized the limited role of the court in this matter, saying, "I stress that the Federal Court of Accounts should ensure the bidding process is transparent and fair, fostering improvements without undermining the regulatory agency's autonomy."

The ruling also requires the construction of an internal railway yard with a minimum capacity of 900 TEUs per day and suggests considering an increase in the minimum concession fee, which is currently set at zero.

This terminal is seen as vital for preventing port capacity issues by 2028 as Brazil's trade and logistics demands continue to grow.