Spotlight: Tracking Brazil's rail renaissance

Brazil's rail industry is benefitting from federal development bank BNDES' national industrialization policy, a 300bn-real (US$60bn) program focused on supporting local industries on innovation and digital transformation, sustainability, expansion of exports and greater productivity.

"Industrial policy on the part of both the government and BNDES is favorable to the rail industry," Vicente Abate, president of rail equipment manufacturers’ association Abifer, told BNamericas. 

According to Abate, projects to build rail lines in Brazil generate significant positive effects for local industry, particularly in manufacturing freight cars, which is done locally.

"Only bearings are imported. Regarding other products, everything can be manufactured in Brazil. Locomotives and passenger trains are not the same thing – 50% of production of locomotives is local," said Abate.

Despite some uncertainty, expectations of advances in large projects are attracting the attention of important global suppliers, such as European firm Alstom and Chinese train manufacturer CRRC. These projects are also generating significant amounts of work for specialized consultancies such as Egis, Pöyry, Progen, Sysfer and Tenax.

While progress on passenger train projects depends more on state and municipal governments, with many of them also relying on financing from BNDES, initiatives and regulations involving freight lines are more dependent on the federal government, as they generally involve more than one state.

BNamericas takes a closer look at some of the passenger and freight rail projects currently underway in Brazil.

PASSENGER TRAINS

February will be an important month, as São Paulo state is set to hold a tender for a PPP contract for the Trem Intercidades rail system on February 29, one of the most important passenger train initiatives in recent years.

The contract to build and operate the 101km line involves estimated investments of 13.5bn reais.

Brazil’s biggest transport infrastructure company, CCR, is in advanced talks to lead a consortium of firms to present a bid, a source familiar with the matter told BNamericas on condition of anonymity.

Meanwhile, Metrô-DF, the subway operator in federal capital Brasília, recently published a tender notice to contract a firm or consortium to carry out expansion works on the Ceilândia line. 

The works comprise a 2.3km extension and construction of two new stations, which will be built between the areas known as QNO 5 and 13, and between QNO 7 and 15. 

Proposals from interested companies will be received until April 3, the operator said in the official gazette. Metrô-DF did not disclose the expected investment, but it is part of a larger expansion program that involves 2.5bn reais.

State-run subway operator Companhia do Metropolitano de São Paulo also started the public consultation phase for a project to build line No. 20-pink, which will cover just over 31km in the country’s biggest city.

The operator held a public consultation meeting early in January, another on January 29 and is due to hold a third on February 1, all in municipalities where the line will be built.

The consultations are part of the process to obtain the environmental permits for the new line and the western extension of line No. 2-green, which will be connected to line No. 20. This entails construction of 1.3km of track to connect Vila Madalena station to Cerro Corá.

FREIGHT RAILROADS

Over the last few years, Brazil has pushed forward with a series of initiatives to improve the freight rail network, with the primary objective being to reduce the high proportion of cargo transported via highways. 

In addition to government efforts to agree early concession renewals with companies in exchange for investments, there is also a desire to alter the model of rail authorizations, allowing companies to take on construction of lines without having to participate in a tender process. 

"The authorization regime is theoretically a good idea, but unfortunately, of dozens of companies that have expressed interest in this contract model, we still haven't seen any projects really moving forward," Luis Baldez, president of cargo transport association Anut, told BNamericas.

Regarding early renewals of concession contracts, the government is currently pressing mining firm Vale and logistics company MRS Logística to pay additional fees of nearly 30bn reais for certain adjustments in the concessions renewed under the Jair Bolsonaro government between 2019 and 2022.

Despite the challenges in this area, advances are being seen in freight projects.

Earlier this month, infrastructure firm Marquise Infraestrutura started construction of a 101km stretch of the Transnordestina railroad in Ceará state.

The works, costing an estimated 1bn reais, are being carried out by Marquise for Transnordestina Logística (TLSA), a subsidiary of steelmaker CSN. The construction involves sections 4 and 5 of the railroad between the municipalities of Acopiara, Piquet Carneiro and Quixeramobim and is expected to be completed in two years.

When finished, it will be one of the most modern railroads in the country, with 11 viaducts and five bridges.

The Transnordestina railroad is a complex project involving coordination between the companies, the federal government, and the authorities in Ceará and Piauí states. It will run for nearly 1,200km, with 800km already completed. It will mainly transport grains and minerals across 53 municipalities in Ceará, Piauí and Pernambuco states. 

Construction of the original and more extensive Transnordestina project was expected to be completed more than a decade ago, but it ran into various delays and the company responsible at the time had difficulties in obtaining the required financing.