Brazil provides US$640mn financing boost for northeast railroad

Brazil's government announced 3.6bn reais (US$640min) in financing boost to support the development of the Transnordestina freight railroad in the country's northeast.

The financing will be provided through the creation of the social infrastructure investment fund (FIIS), which will be managed by development bank BNDES. 

The expectation is that the new fund will raise around 10bn reais, with 3.6bn reais expected to be invested in the railroad. 

The cost of the project "amounts to 12bn reais in total. Transnordestina is the largest infrastructure project in the northeast. We are going to complete the three branches: Piauí, Ceará and Pernambuco. Integrating the region is a commitment," transport minister Renan Filho said in a statement.

"With this new funding, we expect to complete the project by 2027," he added. 

The government's efforts to complete Transnordestina have been applauded by market players. 

"It's important for rail projects to advance with integration with other infrastructure models, such as highways, ports, waterways and airports. Even with the challenges in public finances faced by the government, it's also important that we find ways to advance with financing projects," Vicente Abate, president of rail equipment manufacturers' association Abifer, told BNamericas.

Some 679km of the total 1,206km Transnordestina system have been completed. It consists of a main line that runs from Eliseu Martins in Piauí state to Salgueiro in Pernambuco, with branch lines that lead to Pecém port in Ceará state and Suape port in Pernambuco. 

Source: Câmera dos Diputados

The release of resources from the FIIS will be done through financing by local development bank Banco do Nordeste. The Transnordestina project will receive 1bn reais per year between 2024 and 2026 and another 600mn reais in 2027.

The work is the responsibility of Transnordestina Logística (TLSA), which is controlled by the CSN steel group.

The Transnordestina project began in 2006 during the first term of President Luiz Inácio Lula da Silva and was expected to be completed in 2010. However, the project suffered multiple delays due to a lack of funding from the federal government.

TLSA has complained of late transfers of government funding, which has delayed the progress of the works.

With Lula taking office again in January 2023, the federal government has resumed support for infrastructure projects in the northeast, which is an important base of support for the current government.  

The Transnordestina system is part of an important value chain involving engineering and services companies, since the contracts are divided into sections of 50km each and involve significant investments.

An executive directly involved in the contracting process told BNamericas that, under the contracts signed most recently, it costs between 17mn reais and 20mn reais to build each kilometer of the lines.