Why private firms’ growing railway interest is causing controversy in Brazil
The number of requests from private sector firms with plans to assume railways projects in Brazil is growing thanks to a new regulatory framework, but controversies regarding these plans are also increasing.
Through its recently launched Pro Trilhos program, the government is projecting investments worth 100bn reais (US$17.7bn) as companies have requested authorization for 23 railway projects, according to the infrastructure ministry.
Earlier this year, the government published a decree authorizing private firms to build and operate short-distance rail networks under rights-of-way issued by the government. Previously, interested companies had to participate in tenders organized by the government that could take years to finalize.
The decree will be in force until February next year and congress is now discussing if turning it into law.
Companies interested in building railways have rushed to obtain authorization for their projects, which has generated doubts about their financial and technical feasibility.
“The format is perhaps not the best way and this has generated discussion even at the TCU [the country’s audit court] and this issue should be reviewed by congress when turning these new rules into law,” Paulo Dantas, an infrastructure and project finance specialist at the Castro Barros Advogados law firm, told BNamericas
“The question of railways are long-term projects, they need to be well-designed projects, they cannot be based on a race between companies,” he added.
The 23 project requests that the government has received so far have a combined extension of 7,501 km.
“The vast majority of projects requested so far are greenfield, I don’t see much room for many more requests for green-filed projects. The trend will now be for brownfield projects, since of the 30,000 km of existing railways in Brazil, almost half are abandoned,” Vicente Abate, president of national rail equipment manufacturers association Abifer, told BNamericas.
Controversies related to the authorization process have already started to emerge.
In September, logistics firm VLI filed four project requests with the government. Weeks later, rival logistics company Rumo, which is part of local energy conglomerate Cosan, requested authorization for the same railway stretches, generating a legal dispute between companies.
Here BNamericas takes a look at all the projects. In some cases, one company has requested multiple authorizations.
– Brazilian port operator Petrocity Portos requested authorization to build two railways. One is a 420km railway connecting the city of Säo Mateus, in Espirito Santo state, and the municipality of Ipatinga, in Minas Gerais. The company is also looking to build a 1,108 km stretch linking Barra de Säo Francisco in Espirito Santo state with capital Brasilia.
– Local logistics firm VLI requested authorization for four projects. One railway of 557km in Mato Grosso state, another one with 235km in Minas Gerais, a third of 245km in Maranhäo, and a 8km railway in Säo Paulo state.
– Paraná state rail company Ferroeste also sought authorization to build four railways. One of 76km in Mato Grosso do Sul state, a second with 405km connecting the cities of Guarapuava and Paranaguá in Paraná, a third of 166km linking Cascavel and Foz do Iguaqu (Paraná), and a fourth with 286km connecting Cascavel and Chapecó in the state of Santa Catarina.
– Brazilian logistics firm Grõo-Pará Multimodal requested authorization for the construction of a 520km railway to connect the municipalities of Alcântara and Açailândia in Maranhäo.
– Planalto Piaui Holdings, part of Brasil Exploration Mineral (Bemisa), which has the Planalto Piaui iron ore project in Piaui state, sought authorization for a 717km railway connecting Corral Novo municipality in Piaui with Suape, a port city in Pernambuco state.
– Local logistics firm Fazenda Campo Grande is seeking authorization for the construction of a 7km railway in Santo André, a city in the metropolitan region of São Paulo state.
– Brazilian consulting firm Macro Desenvolvimento has requested permission to build a 610km railway connecting Presidente Kennedy city, in Espirito Santo, with the Conceição do Mato Dentro and Sete Lagoas municipalities in Minas Gerais.
– Rumo, which is part of local energy conglomerate Cosan, has requested authorization for three projects: a 37km stretch connecting Santos, Cubatão and Guarujá in São Paulo state, a 577km railway in Mato Grosso, and another one of 235km in Minas Gerais.
– Brazilian pulp producer Bracell is seeking permission to construct two railways in Säo Paulo state, one with an extension of 4km and another one with 19.5km.
– Mining firm Brazil Iron Mineração has requested authorization to build a 120km extension railway in Bahia state.
– Morro do Pilar Minerais is seeking permission for a 100km railway extension in Espirito Santo.
– Food company Minerva has filed a request to build a 57km railway line between Aquailândia, in Maranhão, and Barcarena, in Para state.