In the tracks of progress: the promises of the Brazilian railway sector for the coming years

In an article published in this space, I wrote that the planned investments in 2020 signal a general improvement in the country's economic scenario.

Recently, during an event, I chatted with Vicente Abate, president of the Brazilian Railway Industry Association (ABIFER) and I could get a more accurate idea of the optimism that is spreading to the sector today.

It is no secret that the Brazilian rail sector has problems. Indeed, very old problems, almost the same since the 1970s. Over the past decade, concession contracts have been drawn up to try to reverse the picture without much success.

In part this is due to the very format in which such contracts were conceived. When the government cares a lot about tax revenue, it loses its hand for efficiency. In many cases, costly contracts were made in a hurry, giving companies not only the responsibility for building and operating the rail network, but also the payment for their use.

In others, investments ended up being hampered by temporality. After all, 20- or 30-year contracts that were closed in the late 1990s naturally cease to be attractive, given that no one wants to put more money into something they will soon have to hand back to the government.

In this scenario, the sector began to see with great optimism the proposal for early renewal of contracts announced by the government, which was approved by the Federal Court of Audit in late November.

The lawsuit was analyzed as part of the judgment of the extension of the Paulista network contract, but should serve as a reference for future decisions involving the Carajás Railroad, South Network, MRS Logística Railroad, Vitória Minas Railroad, among others. This has given new gas for companies to re-invest in the sector and many orders are being promised by 2020.

From a legal point of view, the advancement of PLS 261/2018 points to the effective recognition in the planning of the possibility of the private initiative to build, operate and exploit its own railways in national territory, being able to deactivate, eradicate them or alienate them to new ones. investors, such as any property, as long as they are authorized by the federal government through a contract of adhesion, preceded by a public flame or announcement.

 Among the companies that want to increase investment in the sector, Rumo Logística S. A certainly came out ahead, winning the first concession auction held by the Federal Government in 2019, at Porto Seco Centro-Oeste, in Anápolis (GO). The event was awarded for R $ 2.719 billion, a 100% premium over the minimum of R $ 1.35 billion. Investments are estimated at R $ 2.72 billion. The company, it is good to remember, is also responsible for Malha Paulista, where it foresees an investment of R $ 7 billion and an increase of movement from 35 to 70 tons.

Valec has also advanced in the construction of the East West Integration Railroad (FIOL). The railway is divided into two parts, with an estimated investment of R $ 6.4 billion. The first, between Ilhéus and Caetité, presents 76.2% of physical progress; the second, between Caetité and Barreiras, 28.8%.

MRS also has a very advanced concession renewal process. The business plan includes more than R $ 7.5 billion in investments to increase production capacity, improve transportation and public interest investments, as well as an additional 14.6 billion to sustain railway assets.

VLI Multimodal S.A is also with full safes ready to invest in this new boom period that is announced. Since 2007, the company has been operating the northern section, which connects Porto Nacional, in Tocantins, A?ailandia, in Maranh?o, and should also benefit from the good times for investments in the sector.

Other good news is accumulating in works in the subway sector in Sao Paulo, Rio de Janeiro, Bahia and Ceará. It is good to remember that ABIFER has argued that, in consortia, most wagons and locomotives are of national manufacture, even with imported parts. There seems to be a confluence of competent people interested in both government and civil society, so that the Brazilian railway sector finally finds the tracks of progress. We are looking forward for it.