Prosecution Office presses the Federal Government to change the rules of the High Speed Train auction

The Government has acted with some indifference with regard to the recommendations made by the Federal Prosecution Office of Brasília (MPF-DF), that two weeks ago had warned the Federal Government about the judicial and financial irregularities that were present in the Invitation to Bid for the Bullet Train project. For the Prosecution office, the National Land Transport Agency (Agência Nacional de Transportes Terrestres – ANTT), a mixed company associated to the Ministry of Transport and responsible for the project, has ignored the recommendations put forward by the prosecutors, running the risk that the legal proceedings could end up in the Courts. ANTT has not shown any sensitivity to any demands made by the MPF, said the Federal Prosecutor Paulo José Rocha Júnior.

The points raised by the Prosecution Office do not deal with issues about whether it is necessary or not to do the job, but rather the constitutional and legal limits that are inbuilt into the Invitation to Bid. One of the rules that is considered to be most fragile is that concerning the counter guarantees required by the Government to finance, by means of the BNDES, a total of R$ 22 billion (US$ 13.68 billion), to proceed with the project. The MPF says that, if the project does not work out, it is established that the Federal Government shall then receive – through the state company Etav – shares in the consortium that is responsible for the work. However, the fact is that these shares would be worth very little or even nothing, as they would be the result of a non-compliance with the concession contract. From the legal standpoint, says the MPF, this would not make any sense, as these shares would be useless as counter guarantee for the purposes set out in the Tax Responsibility Law (Lei da Responsabilidade Fiscal).

The ANTT denies that they are not responding to the issues mentioned by the MPF. According to Bernardo Figueiredo, who is the General Manager of the agency, the recommendations have been dealt with by the Office of the General Counsel to the Federal Government (Advocacia-Geral da União – AGU). We may not agree with some of the points, but everything is being handled, he said.

The creation of the state company Etav, which shall be responsible for the Bullet Train project, and the financing by the BNDES, still depend on the voting of the Provisional Measure No. 511/10 which is now in Congress. MP 511 would have been discussed this week, but the voting has now been back to next week. The validity of the Provisional Measure ends on the 7th.
With only eleven days to go for the date set for the consortia to deliver the accreditation documents for the Auction, the approval of the MP is considered by the Government to be the only way to avoid the postponement of the auction. If there is no legal approval of the financing and its limits, as also of Etav and its respective capitalization, this prevents the preparation of proposals with a minimum of judicial certainty, says the Prosecutor Paulo José Rocha Júnior. In the Invitation to Bid there are too many points that have not been addressed beforehand, and for which the risk rests entirely with the proponent, such as the definite route and also geological studies. It is now hoped that the Government has the necessary wisdom not to step before the deliberations made by Congress about the MP511, which could change important rules of the tender process.

The general atmosphere in Brasília is already in favor of a second postponement of the tender process. The consortia have again stepped up the pressure and want more time. The bullet train that is planned, to connect Campinas, São Paulo and Rio de Janeiro, plans for the installation of a stretch of railway 510 km long. The Government estimates a total cost of R$ 34 billion (US$ 21.14 billion), while the market is already putting the total cost at something around R$ 50 billion (US$ 31.09 billion).