Brazil can impose the national rail on the new concessions

The draft of the first notice to bid for the railroad concession from the government establishes that the winner will have to purchase at least 75% of the rails in the domestic market during the construction process and 50% in the maintenance phase.

According to the rule, this requirement applies only if the national price is 35% higher than international or more, discounted sea shipping. This percentage is reduced by one point per year until the end of the 35-year concession.

The notice to bid of the 477-kilometer railroad that links Açailância (state of Maranhão) to Vila do Conde (state of Pará), which is under public consultation, is considered a model for at least nine other stretches that the government plans to grant this year, totaling 10,000 kilometers of new rails.

The market reserve is being planned although Brazil is not currently a producer of rails. As Folha revealed last week, the government has pushed steel mills to resume production in the country.

If there is a moment which is creating the scale that enables production in Brazil again is now, the CEO of the Empresa de Planejamento e Logística, Bernardo Figueiredo, said. According to him, the demand is estimated at 1.5 million tons only for construction, not to mention the maintenance step.

According to the industry, in order to production being sustainable, it must have a demand of 400 thousand tons of rails per year.

In the market, the rule is being seen as a disguised administration of prices to whoever comes to producing rails in the country, which would hurt their competitiveness.

Another criticism is that the requirement may make the work more expensive, what is worrying. Valec, state-owned company of railroads, will pay a kind of monthly rent for the use of the railroad, which will necessarily have to cover the cost of construction.

The problem is that there is no guarantee that Valec will pay the concessionaire, according to the lawyer Letícia de Queiroz de Andrade, from the law firm Siqueira Castro. And the state-owned company has no assets or revenues to support these payments.

Figueiredo said the notice to bid provides advance payment of 15% of the work amount to the concessionaire. BNDES will finance up to 80% of the building and, according to him, there is a negotiation for the Valec’s receivables are accepted as collateral. Thus, if Valec does not pay the builder, the latter would not pay the funding, which would be charged from the state-owned company.

The lawyer Rodrigo Barata, from the law firm Madrona Hong Mazzuco Brandão, points out that another risk for companies is the relationship between the current railroad concessionaires and new ones.

Figueiredo said Valec is already discussing specific contracts on how to use the tracks.