Bullet Train Tender May Attract the Chinese

The new model for the tender for the bullet train, as announced the day before yesterday by the Government, could attract new investors, especially foreign investors, into the competition for this project, which shall cost at least R$ 33 billion by official calculations. This is the assessment made by specialists and developers interviewed by the GLOBO Newspaper, who consider that the changes dilute the risks and also add transparency to the process. The Chinese, who had withdrawn, should now come back with a bang, with both money and technology, and at least three European construction companies are reckoned to be strong candidates for the concession of infrastructure. There is also an expectation for the interest of private investment funds in this project.

– We have established the conditions for the participation of foreign companies. At least, we are speaking the international technical language, rather than the one that has fallen out of favor with the latest happenings concerning infrastructure. The model has become clearer. The international investor needs transparency.  Before this was a step in the dark – said professor Paulo Resende, the coordinator of the Logistic Studies Nucleus of the Dom Cabral Foundation.

Construction giants such as French companies Bouygue and Colas, and Spanish company Obrador-Huarte-Lain (OHL) – present in major road projects throughout the country – can also be one of the new parties interested in the infrastructure tender (for the railway network).

Frightened at the possibility of having to bear the risks of the work projects, which does not exist anymore, the Chinese – who have built bullet trains within their country and also have the resources – left the process a few months ago. For the Government, the return of the Chinese could be an important factor, as their prices are competitive and should stir up the competition between the foreign players.

In the meantime, Japan – whose group of companies already has the R$ 10 billion in financing guaranteed by their nurturing banks, France and Spain regard the high speed rail track in Brazil, which is now considered to have the highest potential yield in the world, as an opportunity to expand business.

Officially, the companies say they need time to study the changes. However, they make no effort to hide their interest. This is the case of Japanese firm Mitsui and French outfit Alstom. In a statement, the company says that they and the French State Railway Company have reinforced their interest in this Project and shall continue to discuss the project with all the interested parties, using their experience, in order to help to bring the technology of high speed trains to Brazil.

The general assessment is that the holding of the construction tender after the choice of the consortium that shall operate the technology and establish the executive project with all necessary details about the work – which in essence means dividing the project in two – shall let the companies know exactly how much they shall spend. The absorption of part of the risks by the Federal Government – which shall ensure that the contractor shall get the payment of the rent for the railway network, to be paid by the operator – has created the possibility of the property exploitation and may cover possible differences in the value of the work project.

The Brazilian Association of the Railway Industrial (Associação Brasileira da Indústria Ferroviária – Abifer) feels that this new model rights the faults of the previous one and should attract more companies to participate in the tender.  For a business development, the segmentation of the construction phase (to be established by the Government) also allows disbursements in stages, which is a requirement of this segment.

– The carving up of the tender could be an incentive so that the companies may be attracted according to their areas of expertise. Contractors for the construction, and owners of technology, for operation – said Peter Wanke, a specialist in logistics and infrastructure from Coppead/UFRJ who does, however, question the priority that is being given to the bullet train project.