Government prepares announcement of the 3rd postponement of the bullet train project

The Government is about to announce the third postponement of the auction for the bullet train service to connect Campinas, São Paulo and Rio de Janeiro.

Without any deals closed between large Brazilian construction companies and foreign suppliers of technology, there is no longer any certainty that there will be parties interested in the project. Planned to take place on 11 July, an extra month should now be given for the interested parties to make their proposals. Should this happen, it will be the third postponement, the other two having occurred in November 2010 and April this year.

In November 2010, the Government had a favorable situation for itself. A consortium between Korean and Brazilian companies said that they would present a proposal in any case.
This consortium did not include any of the five largest building firms in the country. The Government tried to convince the construction firms to establish alliances with other technology owners so as not to lose a significant business and thus have a competitive auction.

The situation now is the opposite. The Korean consortium has been breaking up since then. In that same month of November, three national construction companies pulled out of the agreement. This year, four Korean companies have followed suit, announcing that they were out of the proposed agreement.

According to market sources, not even the Korean owner of the technology would promise participation.  The group would only be feasible with the participation of some of the largest national construction companies.

No Guarantee

Therefore, there is no guarantee that any consortium would present a proposal. And, on top of this, all the owners of the technology have already said that they would only come in if one of the large companies (or all of them together) is the leader of this project.

In the two previous postponements, the construction companies asked for changes in the project to make it more attractive. They said that the Government budget, which now stands at R$ 38 billion (USD 23.85 billion), is less than the value they had calculated, which was R$ 55 billion (USD 34.53 billion).

The Government says that it has already made all the concessions it possibly could and now offers only one-off changes to the project. For the members of the Government, the building companies want to make the model of service concession with the work included unfeasible, to implement the traditional model where there is no risk for them: a Government work project and then a concession.