Brazil's plans for highways and railways

The Brazilian government is expected to allocate at least 70bn reais (US$14.5bn) to the transport ministry during the four-year term of Luiz Inácio Lula da Silva, which ends December 2026.

The budget is well above the 6bn reais a year during the previous Jair Bolsonaro government (2019-22).

Despite expanding public investments during Lula's administration, the government seeks to attract private sector firms to transport infrastructure.

The transport ministry's executive secretary, George André Palermo Santoro, tells BNamericas about the government’s plans.

BNamericas: What is the federal government's investment plan for the transport ministry?

Santoro: We have an estimated budget of 70bn reais for the next four years and that amount could increase.

Most of these resources will be used to repair federal highways that are in poor condition.

This amount is estimated in our fiscal program that is under evaluation in the senate.

If in fact there is a fiscal improvement as we are projecting for the coming years, it’s possible that the amount will be even higher.

BNamericas: Amidst the increase in public investment, what is the government's view of the private sector?

Santoro: We want the participation of the private sector; we want the private sector as partners, whether that’s in the projects themselves or structuring or financing the projects.

BNamericas: What are the most urgently needed improvements for infrastructure projects in Brazil?

Santoro: Our concessions law has not been able to improve the project finance model.

In Brazil, the direct financing model for a company still prevails, direct financing for the operator, but the ideal would be project financing, because with this we remove the restrictions that many companies face to participate in several projects.

In order to improve project finance models, we even want international banks to come and help us.

BNamericas: Does the government intend to stimulate new revenue possibilities for highway concessionaires?

Santoro: We’re not going to force anything, but we want to encourage some options, such as the so-called complementary revenues.

There are several countries where highway concessionaires rely on these revenues, with the installation of large shopping malls, hotels, large shopping centers along highways, and in some cases this represents up to 15% of highway concessionaires' revenues.

We want to encourage this in Brazil as well.

BNamericas: What are the government's plans for the railroad sector?

Santoro: In two months we’re going to launch a detailed initiative for railways, as we did recently for roads.

Currently, investment from the public budget is around 400mn to 500mn reais per year in the railway sector.

A large part of this goes towards the construction of the FIOL [freight] railway and another part goes towards some projects in which we have cross-investments with the private sector.

We’re going to build a portfolio with new railroad projects.

BNamericas: Is the railway authorization system working? Will it continue?

Santoro: The regime is good, but we want to make some updates.

These updates are necessary because there are currently stretches where there is more than one company interested in taking over the project, which makes no sense. We’re going to evaluate a kind of public call for these authorizations, to avoid this type of conflict.

BNamericas: At the end of the year we have the Intercidades passenger rail project in São Paulo, which should be auctioned by the state government. Is there interest from the federal government in intercity train projects as well?

Santoro: We want to encourage that and the starting point will be our attempt to structure a federal government project for an intercity train connecting Brasília and Luziânia [a city in Goiás state]. But before that, in the coming months we’re going to publish a decree with some general guidelines for passenger rail transport.