Brazil fast-tracking rail concession renewals to secure investments
The Brazilian government is looking for new sources of fresh cash to ensure big investments can be made in the country's rail networks.
The federal government has made it clear that it is grappling with significant fiscal constraints, making it difficult to allocate public investments to the sector and it therefore sees early renewals of freight rail concession contracts in exchange for investments as the best way to ensure the necessary funding.
The authorities are in talks with major companies that have rail concession contracts to allow them to renew their contracts in advance, extending the terms and obliging the firms to invest.
"The federal government, through the ministry of transport, is currently negotiating an agreement with [mining company] Vale for the firm to renew its rail concession contracts, bringing forward a series of investments," Marcus Cavalcanti, head of the government's investment partnerships program (PPI), told BNamericas.
"Although the agreement is not expected immediately because there are also negotiations with [transportation regulator] ANTT, negotiations are progressing well," he added.
In addition to being Brazil's biggest mining company, Vale is one of the largest logistics operators in the country, and it is currently in talks with the government regarding the early renewal of the contracts for the Carajás railroad, known as the EFC, and the Vitória Minas railroad (EFVM).
In 2020, Vale reached an agreement with the federal government, then headed by Jair Bolsonaro, to renew the two contracts, which are due to expire in 2027, bringing forward investments of 24.7bn reais (currently US$4.4bn).
However, after President Luiz Inácio Lula da Silva took over in January 2023, the government began a process to review these agreements as it considered the pledged investments were too low.
When asked by BNamericas about what investments the federal government would consider fair to receive from Vale for the early renewals, Cavancanti declined to comment.
Meanwhile, the government is progressing with negotiations on the early renewal of other rail concession contracts.
ANTT announced a public hearing between September 30 and October 7 regarding the review of the contract for Concessionária Ferrovia Centro-Atlântica (FCA), part of logistics firm VLI.
"The current FCA concession contract is scheduled to end in 2026. The renewal proposal extends it for 30 years, including investments of almost 24bn reais," ANTT said in a statement.
"The railway is 7,857km long, crossing Bahia, Espírito Santo, Goiás, Minas Gerais, Rio de Janeiro, São Paulo and Sergipe states and the federal district [Brasília]. The renovation includes almost 5,725km of lines and covers the central-east, central-southeast, Minas-Bahia and Minas-Rio corridors," it added.
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