The railway most desired by agribusiness for the grain outflow from the Midwest region of the country is one step ahead in becoming reality. The Cargill, Bunge, Louis Dreyfus Commodities e Amaggi tradings, in consortium with the business structuring company EDLP, have already delivered to the federal government their Expression of Interest Proposal (PMI) for the construction of the railway section between the cities of Sinop, in Mato Grosso, and Miritituba, in Pará.
The railway, called Ferrogão by the trading consortium, was included in the second phase of the Investment in Logistics Program (PIL 2) after pressure from the agribusiness. With an estimated cost of 11.5 billion BRL, 70% financed by the BNDES, the 930km section will have the capacity to outflow 30 million of tons of grains (soybean and corn) per year from Mato Grosso to the North harbors. It is a sweet deal for the agribusiness: the estimated reduction of freight costs can achieve up to 40%, depending on the market’s condition.
With over than 4 thousand pages, the PMI is detailed survey for the technical, economic and environmental feasibility of the railway section will serve as basis for the bidding document release. Now, the federal government must assess the document so that the public hearings can be summoned. Finally, the study will be forwarded to the Union’s Court of Audit (TCU).
It is an important milestone for us, says Maurício Muniz, Secretary of the Growth Acceleration Program (PAC) from the Planning Ministry, referring to the unlocking of the logistic schedule. Proposals for the Barcarena (PA) to Açailândia (MA) section have also been filed by the Triunfo Participações, and for the Estrela D’Oeste (SP) to Três Lagoas (MS) by the J&F, the holding that controls JBS (animal protein) and Eldorado (paper and cellulose).
As for Ferrogrão, the consortium estimated that the bidding document will be published during the first semester of the next year. In case the concession is performed during 2016, the project would enter in operation for a period of five to seven years – which means, until the 2022/23 harvest.
We want the railway to get off the ground. We made the study the most apt for bidding as possible, and if someone with vision and competitive resources invest on it, that’s great. But we want the railway, says Paula Sousa, director of Grain and Processing from Cargill in Brazil. According to the executive, around 30 thousand grains outflow routes have been analyzed during a year by the consortium until reaches a conclusion about which railway model, following the model presented by the PMI, would be the most eligible for grains outflow in the Midwest.
From Sinop, in the mid-north of Mato Grosso, the railway will go up to the BR-163’s influence area until it reaches the fluvial district of Miritituba. From there, the idea is that the cargo will be transported by barges to the Santarém and Barcarena harbors in Pará, as well as the Santana harbor in Amapá.
Named Pirarara after the Amazon fish, the tradings’ plan is to enter the railway transportation sector surfaced early last year. But Cargill, Bunge, Dreyfus and Amaggi had already joined EDLP a year before that, given the construction delays of the BR-163 and the saturation of the routes to the South.
The agribusiness also considered with apprehension the leadership change in ALL – a delicate moment for any large freight user in Brazil, says Souza – and federal government efforts to advance the railway concessions. For grains outflow, the tranding decided that it was best to create their own way.
Three options are being considered by the consortium: an investor to fully cover the project’s cost; an association with other company (such as the tradings and EDLP as minority shareholders); or cope with all necessary contribution. The second alternative is preferred.
According to Guilherme Quintella, EDLP’s CEO, being agreeing with the railway concession the consortium will act independently, without bonds to the companies.
The study commissioned by the tradings and by EDLP was the only one presented for the Sinop-Miritituba section. Another group that had previously shown interest was UTC – which is involved the Lava-Jato and thus is currently focused on other matters.
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