Developing Brazil's rail network hinges on private sector partnerships

The Brazilian government has recognized that it has little budgetary room to make significant public investments in railroads, which is why it has been trying to attract private investors to the sector. 

During a hearing in the senate infrastructure committee, minister of planning Simone Tebet said that despite the lack of federal funds, the country can continue to expand its rail network through partnerships with the private sector.

However, she acknowledged that it is also necessary to structure a framework to define the best partnership model between local and international companies to carry out these projects. 

"There is nothing more expensive in logistics than building railways. Brazil doesn’t have the budget to invest in railroads. I know there are a lot of interested [investors] from abroad. Whether they will be able to come in with 51% or just 49% [of partnerships], that’s a discussion that we’re already addressing," Tebet added.

Tebet's statements come at a time when President Luiz Inácio Lula da Silva's administration, a major advocate for public investment in the economy, finds itself under pressure from investors to reduce public spending amid signs of deterioration in government accounts.

"In fact, the room in the government budget is quite limited at the moment, even for more urgent areas such as health and education," Roberto Troster, former chief economist at banking federation Febraban, told BNamericas.

Earlier this week, Lula's administration announced a plan to cut 25.9 billion reais (US$4.8bn) in public spending from Brazil's 2025 budget to shore up investor confidence.

Despite the limited room to maneuver in public finances, some progress is taking place in the rail sector, thanks to significant support from private firms, particularly related to the mining industry, since trains are a logical means of transporting minerals produced in remote regions of the country to ports.

BNamericas takes a look at some of the recent developments in the freight and passenger railroad segments.

FIOL

Iron ore miner Bahia Mineração (Bamin), which is part of Kazakhstan's Eurasian Resources Group, has just completed work on section 1 of the west-east freight rail project known as Fiol 1. 

The entire Fiol railroad runs 1,527km from Barreiras in Tocantins state to Ilhéus on the coast of Bahia state and is divided into three sections.

Bamin won the 35-year concession for the construction and operation of the 537km Fiol 1 section in 2021.

The completion of this important stage of the project comes a year after the official start of the works by Bamin.

"From the beginning, this seemingly simple project brought us many challenges," Marcelo Augusto, Bamin's head of railway implementation, said in a statement.

FICO

Brazil’s land transport regulator ANTT has just approved the executive project for the implementation of a section of the Center-West integration freight railroad (FICO) between Mato Grosso and Goiás states.

"The initiative will develop rail infrastructure in the region and improve the flow of local agricultural and mineral production," said ANTT.

Costing an estimated 2.73bn reais, the project is led by Brazilian miner Vale, which is building the line as part of an investment agreement with the government, allowing it to obtain early renewal of its Vitória-Minas rail concession.

Bahia state rail works

In parallel with the federal government's initiatives, Bahia state is also taking steps to promote railroads in a push to develop the local mining industry by improving logistics. 

As part of these efforts, Bahia state-run mineral exploration company CBPM signed a partnership with port authority Codeba aimed at developing joint actions to improve mining logistics in the state.

"The collaboration with Codeba will allow significant advance in the efficiency of logistics operations, benefiting both partner companies and the local economy. We are committed to creating a favorable environment for the sustainable growth of mining in Bahia," CBPM president Carlos Borel said in a statement.

Paraíba light rail system

The transport ministry has authorized the use of a 14.8km section of a line on the Transnordestina railroad for a light rail system to serve Campina Grande, a city in Paraíba state.

"The light rail project will certainly improve urban development and people’s lives. The line runs along a crucial stretch in the city and will be fundamental for enhancing public transport in Campina Grande," transport minister Renan Filho said in a statement.

Details of the estimated investments and project timeline were not disclosed.

Recife subway

The federal government has also approved the disbursement of 136 million reais for improvements on the subway network serving Recife and surrounding municipalities in Pernambuco state.

"The actions include replacing degraded sleepers on 35km of lines in the municipalities of Recife, Jaboatão dos Guararapes and Camaragibe, in addition to replacing 36km of tracks," the cities ministry said in a statement.

The investments are aimed at improving service quality, enhancing comfort for users, punctuality, operational safety, reducing intervals between trains and increasing train speeds. The subway transports 180,000-200,000 people per day.