Brazil tries to tempt bidders with new Lotex proposal

30 August 2019

Brazil’s Investment Partnership Programme (PPI) has adopted a new tactic as it looks to finally privatise the country’s instant win gaming business Loteria Exclusiva Instantânea (Lotex), allowing bidders to pay their winning fee in eight installments.

Previously the sum, which remains at a minimum of R$542.1m (£107.1m/€118.4m/$130.8m), was to be paid in four instalments.

After a lack of interest in previous auctions for the tender, however, bidders will be able to stagger concession payments over a longer period. The first payment must be exactly BR$96,968,123.51.

In addition, the PPI has lowered the criteria for bidders. Previously a single entity bidding for the concession had to be able to show they had operated an instant lottery or online gaming business that had generated BR$560m over a calendar year. This has now been more than halved to R$1.2bn.

Should a consortium put forward a bid, at least one member must have generated R$175m from an instant lottery or online business over 12 months.

Following the publication of the invitation to bid today (30 June), interested parties will be able to submit requests for clarification until 27 September. Written proposals, including financial offers, must then be submitted to the PPI’s granting committee by 17 October along with a R$25m bond. These proposals must be valid for at least a year.

The bids will then be unsealed on 22 October, on which date the participants will be ranked based on their offers. The top-ranked bidder will then enter into negotiations with the PPI over the concession.

Losing participants will then be able to lodge appeals between 5 and 12 November, then objections to the appeals from 18 to 25 November. The granting committee will then make a final judgement on the appeals by 2 December, before confirming its decision as to which company secures the tender on 23 December.

Should this all go ahead, the final contract is expected to be signed no later than 16 April, 2020.

However there is no guarantee that the process will go without a hitch. Plans to privatise Lotex have been hit by setback after setback since they were first revealed in 2017.

Lotex, which is currently operated by Brazil’s largest bank, Caixa Econômica Federal (CAIXA), is being privatised as the country looks to reduce its fiscal deficit through the sale of state assets.

The tender auction has been rescheduled numerous times over the years, due to a combination of the government demanding too high a price for Lotex and a lack of interest from eligible gaming companies. In 2019, the country’s President Jair Bolsonaro pledged to complete the process in the first quarter of the year, only for it to be pushed back to 26 April, then 9 May and finally 28 May.

However the tender failed to attract any interest, leading to it being postponed once again.

While the future of Lotex remains uncertain, progress is being made on regulating sports betting, after a measure giving the Brazilian Congress a two-year window to develop a legal framework for the vertical was signed into law in December 2018. The country's Secretariat of Evaluation, Planning, Energy and Lottery (SECAP) launched a public consultation on issues such as whether a set or unlimited number of licences should be issued, which ends tomorrow (31 August).