Subcontractors would only collaborate with 5% of the capital for bullet train

The five largest subcontractors of the country only accept the possibility of entering with R$ 3 billion (US$ 1.91 billion) of own capital for the bullet train project. This is about 5% of the cost that they have calculated for the project. The Government considers this proposal as unacceptable and will probably cancel the auction which was scheduled for Monday.
Another factor which shall make the auction unfeasible now is that the Federal Audit Court (Tribunal de Contas da União – TCU) has established changes to the bidding documents, by which extraordinary funds would be used to reduce the fares, as the Folha has already predicted.

Apart from the definite cancellation to review the model, the Government also considers the possibility of a third postponement of the auction for a short time.

The large subcontractors (Andrade Gutierrez, Camargo Corrêa, Odebrecht, Queiroz Galvão and OAS) have together studied the project and arrived at a final price which is now above R$ 55 billion (US$ 34.99 billion) for the project. As the actual work would take more than one year to even get started, the value could get as high as R$ 60 billion (US$ 38.17 billion).

The Dilma Rousseff administration has calculated that the cost of the project would now be in the region of R$ 38 billion (US$ 24.17 billion). The Government agrees to be a partner chipping in about R$ 4 billion (US$ 2.54 billion), lending an additional R$ 22 billion (US$ 13.99 billion) through the BNDES, with the possibility of a subsidy of R$ 5 billion (US$ 3.18 billion), and would also inject funds between R$ 3 billion (US$ 1.91 billion) and R$ 5 billion (US$ 3.18 billion) through pension funds and state companies.

Considering the value of the cost as found by the subcontractors, the Federal Government would already give funds for about half the cost of the project.

However, the companies want the Dilma Government to contribute with more cash, or alternatively take on more of the risks of the project. One of the requests was that the Federal Government treble the sum to be invested in the state company for the bullet train, Etav (to some R$ 12 billion or US$ 7.63 billion), and also raise the total Government financing.

Koreans

The Federal Government did not accept the conditions, but had no other choice. The consortium on which the Government was counting to battle it out with the large contractors, TAV Brazil, should not enter the race either.

This consortium, which had an agreement with Korean technology, shall formally request postponement to submit a proposal.

The group is still made up of Brazilian and Korean contractors who do not have funds to take on the project on their own. In addition, they try to negotiate with another country in possession of technology, as the Korean technology is not yet fully developed.

The Federal Government is divided, with one part defending the idea of cancelling the auction or letting it happen and, there being no interested parties, thinking of a new model. One of the many ideas is tomake a Public-Private Partnership (PPP).

Another part wants new postponement for a short period of time, improving the conditions of the project, in the hope that someone will buy the project as it is.