Spotlight: Brazil's expanding rail project portfolio
The Brazilian government is seeing rapid growth in its rail project pipeline as a new mechanism for companies to assume initiatives starts to make an impact.
Last week President Jair Bolsonaro signed into law a decree updating regulations for the construction and operation of railways, under which firms may build and operate short-distance freight routes via government-issued rights-of-way.
Previously, companies had to compete in tender processes that could take years.
The government announced the decree in August and in recent weeks congress authorized the model.
So far, the government has received 64 requests from 22 companies involving potential investments of 180bn reais (US$31.8bn) and construction of 15,000km of railroad, the infrastructure ministry said in a release.
If all projects advance, they will result in a 50% expansion of the rail network, which currently totals 30,000km.
"The deadlines for projects to materialize depend a lot on the length, on the size of each project, but we’re likely to only see the full impact of this model in eight to 10 years," Luis Baldez, president of cargo transport users’ association Anut, told BNamericas. He underlined that not all the announced projects will materialize as they are long term and companies can opt to cancel their plans for a variety of reasons.
The model is designed to help compensate for major government budget restrictions. According to the infrastructure ministry, projected investments using the new mechanism are 23 times higher than its own 2021 budget.
"The government has acted on several fronts to try to attract private investment in infrastructure because it’s not finding alternatives to make its budget more flexible to increase public investment in the sector," Raul Velloso, an economist and consultant who is considered one of the country’s main budget experts, told BNamericas.
"This government or the next administration at some point will have to face this reality and find room in the budget, as the private sector cannot assume all the necessary projects," he added.
Following analysis of the requests by the relevant regulators, the federal government so far has authorized six companies to build nine rail stretches totaling 3,506km with expected investments of 50.3bn reais.
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