On the right track: The renaissance of Brazil's railroads

Brazil’s rail sector is expected to see a significant increase in project activity in the coming years, even though it may not be quite as buoyant as more dynamic infrastructure areas such as highways and sanitation. 

"Despite the challenges facing the rail sector, I view the scenario ahead as promising, both in terms of passenger and cargo transportation projects," Vicente Abate, president of rail equipment manufacturers' association Abifer, told BNamericas.

In recent years, Brazil has witnessed a proliferation of contracts being signed and projects commencing in the highway and sanitation sectors, but these processes tend to move somewhat more slowly in the rail sector.

"Rail projects are generally more challenging both for those who structure them and those who undertake them in terms of project viability. Railroads only start generating revenue once they are fully completed, which presents a feasibility challenge. Given this characteristic, the rail projects we are working on have required more time to ensure their feasibility before bringing them to market," Rafael Vitale Rodrigues, the director-general of national land transport regulator ANTT, explained in a recent interview with BNamericas.

In the coming quarters, the expectation is that more key projects will be unlocked in the passenger transportation and freight segments. 

REGULATION

President Luiz Inácio Lula da Silva’s administration submitted a bill to congress this week aiming to establish deadlines for cities to develop urban mobility plans, with the aim of putting local public policies into effect. 

The law mandates the preparation of these urban mobility plans for municipalities and sets specific deadlines for compliance. Under the federal government's proposal, municipalities with populations of up to 250,000 must present these plans by April 2025, while those with fewer than 250,000 residents will have until April 2024. Failure to meet these deadlines will result in restrictions on obtaining federal government funding.

"The federal government will invest 48.8bn reais [US$9.8bn) in sustainable urban mobility as part of the PAC federal government program. The investments will prioritize high- and medium- capacity transport, including subways, urban trains, VLTs [very light trains], BRTs [bus rapid transit] and bus lanes to reduce travel time in large urban centers and improve the population's living standards," the ministry stated.

In the sanitation sector, Brazil has witnessed a surge in new investments following a change in regulations approved in 2020. Municipalities are required to accelerate their sanitation plans, with non-compliance leading to the denial of federal government money.

PASSENGER RAIL 

One of the most eagerly anticipated projects in the passenger rail segment is the PPP contract for the TIC Eixo Norte intercity passenger rail link in São Paulo state. The contract for building and operating the 101km line is set to be tendered on February 29, 2024, and is expected to involve an investment of 13.5bn reais. 

TIC Eixo Norte will connect the metropolitan regions of São Paulo, Jundiaí and Campinas, utilizing 15 trains and having a travel time of approximately 64 minutes from terminal to terminal.

The contract also includes the inter-metropolitan train (TIM), which will have five stations: Jundiaí, Louveira, Vinhedo, Valinhos and Campinas. The 44km line will operate with seven trains and travel time will be around 33 minutes.

The PPP also includes a concession for São Paulo's metropolitan rail company CPTM’s line No. 7 (ruby), which will cover 57km between the Barra Funda and Jundiaí stations and will have 17 stations. The 30 trains serving this route will be transferred to the future concessionaire.

FERROGRÃO

The Brazilian government recently announced the creation of a working group to assess the progress of the planned concession for the 933km Ferrogrão rail project. This rail system would connect the major grain-producing region of Mato Grosso state to Miritituba port in the Amazon, crossing Pará state. 

The project has been under evaluation for several years, with concerns about environmental impacts and how it will affect indigenous communities opposed to its construction. According to the BNamericas database, the project has estimated capex of US$2.27bn.

"After the creation of the working group, we will engage in a technical and responsible discussion to establish a sustainable model for Ferrogrão; one that has both legal viability in the federal supreme court and environmental feasibility," stated George Santoro, executive secretary of the transport ministry.

RUMO

Earlier this week, Brazilian state-run development bank BNDES announced the acquisition of 750mn reais in infrastructure debentures of 1.5bn reais issued by local logistics firm Rumo. These funds are earmarked for investments in the Malha Paulista, a rail system operated by Rumo, which forms part of Brazil's largest agribusiness export corridor. 

This corridor connects the primary soybean, corn, and sugar producers in the center-west of the country to Santos port in São Paulo state.

TRANSNORDESTINA

The governor of Ceará state, Elmano de Freitas, revealed in an interview with BNamericas that he plans to request federal government support to expedite works on the Transnordestina railway project. 

The state government views this project as crucial for supporting green hydrogen initiatives across the state, as the railway could be utilized to transport green ammonia to regions with agricultural production in the interior of the northeastern states. 

This 1,282km freight rail will connect the municipality of Eliseu Martins in Piauí state to Pecém port in Ceará, with 800km of the total route already completed.