Brazil plans regulatory changes for railway sector

The Brazilian government plans to publish regulatory changes for the railway sector at the end of this year.

As part of the modifications, it is evaluating mechanisms to advance with auctions of contracts for the private sector with government investment support from the start of the projects.

Historically, the government launched rail projects and after a few years it tried to pass them on to private companies by auctioning concession contracts.

“The world teaches us that it is possible to do things differently, to hold auctions with support in order to raise the internal rate of return on projects to a minimum level of attractiveness. Attracting the private sector in an efficient way," said Leonardo Ribeiro, railway secretary at the transport ministry, during a hearing in the lower house.

Under the new framework, the government is also planning to change the authorization regime.

In 2021, the administration of Jair Bolsonaro created the authorization regime regulation, allowing private firms to assume rail projects through an expression of interest in building a line in a specific area of interest. 

However, despite several project announcements, it failed to generate a major increase in sector investments.

The upcoming regulatory update is being followed closely by companies that are involved in freight rail projects. 

Logistics firms Rumo, MRS and VLI, as well as mining giant Vale, which operates extensive rail sections, are holding talks with the government regarding early renewals of their concession contracts and are waiting for the regulatory changes to have more legal security.