The government negotiates within R$ 10 billion in railroads

Before the difficulty in unlocking the 10 thousand kilometers of new railroads announced in 2012, the government has decided to take a more pragmatic approach. On a meeting last night with the three major rail concessionaires in the country, the Minister of Planning, Nelson Barbosa, has heard a proposal which might increase within R$ 10 billion the infrastructure program investments volume which president Dilma Rousseff intends to announce on June 9. 

If they have their concession agreements renewed in advance, the three companies, América Latina Logística (ALL), MRS Logística and Vale Logística Integrada (VLI) ¬ undertake to invest between R$ 7 billion and R$ 10 billion on the modernization of their respective networks.
The contributions, according to official sources, would be added to what the companies had already been forecasting to pay, regardless the extensions. The current agreements extension, signed in the 1990 with due date at the next decade have been included in the government agenda on the last weeks and a decision on the subject shall be taken before the 9th.

A special point is deal of attention: after have been bought by Cosan, ALL has a robust plan of investments for the next four to five years, but a great part of the expenses is conditioned to the concessions extension. Its agreements expire between 2026 and 2028. Without a broader focus, the company claims that there would be no time to recover the investment. On the other hand, the contribution of ALL is seen by the government as essential for allowing upgrading conditions in the overloaded São Paulo rail network.

From 2016, with the likely opening of the North-South Railroad segment between the towns of Ouro Verde (GO) and Estrela D’Oeste (SP), the government considers that it is urgent to facilitate the increase of the existing rail capacity in São Paulo in order not to create future bottlenecks for the freights to the Port of Santos.

Besides discussing the renovation of the agreements, Barbosa has used the meeting as a thermometer to measure the interest of the companies in their own concession of North-South. The government wants to transfer to the private initiative two segments of the railroad: Palmas (TO)¬-Anápolis (GO), which works are already concluded and under incipient operation by State company Valec, and Ouro Verde¬-Estrela D’Oeste, which has more than 80% of the works already executed and deliver forecast in 2016. On this segment, whoever wins the auction shall be able to undertake the rest of the works.

VLI operates the only allotment of North-South in full operation which connects the district of Açailândia (MA) to Palmas. According to government sources, the discussion about the participation of these concessionaires on the segments which shall be privatized has been “productive”.
The government also intends to include on the next round of concessions the denominated “Soybean Railroad”, between Lucas do Rio Verde (MT) and Campinorte (GO), which has already had its viability studies approved by the Supreme Audit Agency (TCU). The risk of lack of interested companies caused the project to be kept away until now.

There are still doubts about the concession model. Frowned upon by the market and by the Ministry of Finance, the system by which Valec buys and resells the freight capacity of the railroads should not prosper at least as announced in 2012. In some cases, such as North-South, the collection of onerous grant has been assessed.