Federal government will test new railroad model

Government put on sale the possibility of transporting freight through East-West Railroad, which is only 20% built. The track will be ready in December 2014, according to the state-owned company Valec, responsible for the work. The offered stretch is 536 km long and connects the city of Caetité to the port of Ilhéus (state of Bahia).


There is already one company interested, as the CEO of Valec, Josias Sampaio Cavalcante Junior, reported to ‘Estado’. It is Bahia Mineração (Bamin), a subsidiary of Eurasian Natural Resources Corporation (ENRC), headquartered in England. But it is necessary to open the opportunity to the public and other potential interested parties.


This will be the first test of Valec in the new role of freight capacity dealership, according to the railroad model announced in August 2012. The idea is to deliver the construction and operation of 10,000 kilometers of railroads to the private sector. The concessionaire will sell all its freight capacity to Valec, which will offer it to companies that have their own freight or third parties to carry freight. The offer announced on Thursday is the first operation of its kind.


The railroad is a somewhat different case from other railroads of the logistics package, because it is under construction by the Valec. Cavalcante explained that, when it is completed, the track will be offered to the private sector. It is not the most usual. In most cases the private entrepreneur will be in charge of construction.


According to the technical note of Valec, tariff and operational rules will be eventually detailed. The procedures for interested parties reserve time to carry the freight are not determined as well. According to the CEO of Valec, the freight capacity was offered now, so far in advance, to check what kind of company will use the railroad. If appropriate, adjustments can be made. The expectation is that the main customer on this stretch will be Bamin.


Corridor. When the railroad is extended until Barreiras (state of Bahia), as the plan is, then it will also be an export corridor for soybeans produced in the region. The works for this stretch were suspended for route change, which originally would destroy two caves. Because of the changes, it is now undergoing a new review of the Brazilian Court of Audit (TCU) and the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA). Cavalcante expects that work will be resumed this year.


However, for the railroad to operate for export, the new port of Ilhéus needs to be ready. There are plans to install a Bamin’s private terminal and a public port in the region.
The CEO of ENRC in Brazil, José Francisco Viveiros, praised the decision. I was very happy because it is an indication that Valec is committed to the completion of the railroad. He said the railroad is important to make the Bamin’s project viable, which wants to extract and export 20 million tons of iron ore per year. The intention is to invest $ 3 billion in the mine, in the purchase of trains and in a private port terminal in Ilhéus.


For now, though, everything is in its initial stage. The license for the exploitation of mines has been requested, but it is not released because the National Department f Mineral Production (DNPM) suspended all the grants last November because of discussions around the new mining code. The railroad is under construction, and the port is in the licensing phase. At the moment, Bamin explores iron ore in an almost experimental way, Viveiros said. It pulls a small volume, shipped in Ferrovia Centro-Atlântica (FCA), for the port of Espírito Santo, a journey of 1,400 km.

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