Federal Government assumes the entire risk of the Brazilian HSR

In order to try to achieve the bullet train, the Brazilian government yields and will be responsible for the entire risk of the venture. In return, it will require technological transfer and proof of experience, which increases the competition between Europe and Japan. The president Dilma Rousseff wants to get the project started as soon as possible. Even if it may be necessary to remodel the project.

The business risk will be of the government, as was in the previous model, including the demand (the operator will only pay for the use of the infrastructure from a certain point), environmental, engineering and expropriation risks.Today, passing the risk to the private sector is a very expensive thing. It is more advantageous to take the risk than pay double, justified Bernardo Figueiredo, former director general of the National Land Transport Agency (ANTT – Agência Nacional de Transportes Terrestres), appointed by Dilma as CEO of Etav, the state-owned company founded last Wednesday and that will be compulsory partner of the winner of the auction.

The train linking Campinas to São Paulo and Rio de Janeiro is provided in the Brazilian Mobility Growth Acceleration Program (PAC – Programa de Aceleração do Crescimento) and should also enter the round of new concessions that the government will announce next week.

With planned investments of $16.37 billion, the government does not want to make mistakes on the preparation of the notice to bid to prevent inexperienced companies from winning, as happened to the airports. We have concern that what happened when such care was not taken does not occur here, said Figueiredo. To do so, he will assess the volume of accidents of the parties interested: We want groups that have a history of operation, which can demonstrate that they know it deeply and have a well-done service.

With this profile, Japan, France, Germany, Spain, Italy, Korea and China become strong competitors. There will not be a large number of interested parties, but will be a bitter dispute, he predicted. As a measure for attracting, the government decided to create a rule that a competitor that holds the technology shared with other groups can enable more participants in the competition, but will protect the guarantee of know-how transfer by contract.

Technology. We want the heart of the technology package has more commitment to the project, but there will be flexibility. In the first attempt to achieve the bullet train, investors were losing interest, especially Koreans. We thought we had a project that was a good deal, but the entrepreneurs did not want to take risks, he said.

With the new attitude of the State, taking on more responsibility, the expectation is that the interest rises again. I have never seen our President to give up something she thinks is important, he said. It is not on our agenda the possibility of not doing it. I only work with the alternative “to do”. Despite the association between public and private sector, the current model is not a classic Public-Private Partnership (PPP). We cannot ignore any tool. If the PPP become the best tool, it can be used, he said.

With the constitution of Etav, the CEO intends to deliver the project in late 2013 for the work to start next year and be completed in 2019. This date can be anticipated. My mission is to make the HSR come into operation as soon as possible.

Besides the role of investor and the choice of a partner, the other challenge of Etav has to do with the critical path of construction of the railroad where the trains will move. The third is to convince society that the project is not preposterous or experimental. Our proposal is bold, because we want the HSR to be economically sustainable, he said, noting that this does not happen in other countries.