Government will make new debt to fund part of railroads

The government officially assumed that can make public debt to pay for the construction of 11,000 km of railroads provided on the Logistics Investment Plan. The estimated value is up to $18.32 billion in four decades.

The act is on a decree regulating the new rail concession model, published yesterday.

An article of the decree lists the guarantees that Valec, the state-owned company for railroads, will have to submit to the construction companies during the contracting of works. One of them will be government bonds.

All others are properties that Valec already had and would serve as collateral anyway.

Under the new railroad concession model, a company wins a concession to do the work. Valec will pay all costs to it.

In return, the state-owned company gets the right to sell the use of the railroad to carriers.

The new railroads will cost close to $45.80 billion. But the government estimates is that they will only be able to collect between 60% and 70% of this value. The difference – somewhere between $13.74 billion and $18.32 billion – will have to be paid by other sources.

In the market, there were fears that Valec would not pay the company doing the work. The company is mired in debt and depends almost entirely on the Treasury. So more precise guarantees were requested on the notices to bid.

Another problem of the railroad concession is that the control agencies did not consider that the model had legal support, since it is being auctioned as a concession, but is more like a Public-Private Partnership, which provides subsidies.

The government was reluctant to admit that railroads need a specific legislation and argued that has made other concessions in the electricity industry in a model similar to that of the railroads.

But given the delay in the program, it had been talking to parliamentarians to send a provisional measure or a Bill to legalize the model and clarify the guarantees.

It chooses to do it by decree, which needs no approval by Congress.

For the lawyer Rodrigo Barata, from the law firm Madrona Hong Mazzuco Brandão, the decree does not solve the problem of guarantees and weakens the concession model. According to him, the creation of a new concession model legally would have to pass through Congress.