The government’s railway plans to get Brazil back on track

With 60 percent of all cargo shipments in Brazil being transported by trucks, the country came to a near standstill, as supermarket shelves laid empty in some major cities. It was in the aftermath of this industrial action—and with the looming threat of future stoppages—that the federal government has noticed the importance of boosting and improving the country&#8217;s national rail network.&nbsp;</p> <p>In this process of revitalizing Brazil&#8217;s railways, 2020 may well turn out to be a decisive year. <a href="https://brazilian.report/business/2020/01/10/brazil-infrastructure-privatizations-2020/">The federal government is planning a series of rail concessions</a> including investments in new lines, the duplication and modernization of existing tracks, as well as the purchase of new trains and carriages.</p> <hr class="wp-block-separator"/> <h4 style="text-align:center">Brazil railway network</h4> <figure class="wp-block-image"><img loading="lazy" width="788" height="783" src="https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map.png" alt="Brazil railway map" class="wp-image-31530" srcset="https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map.png 788w, https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map-150x150.png 150w, https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map-300x298.png 300w, https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map-768x763.png 768w, https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map-610x606.png 610w, https://brazilian.report/wp-content/uploads/2020/02/Brazil-railways-map-210x210.png 210w" sizes="(max-width: 788px) 100vw, 788px" /><figcaption>Source: <a href="https://www.antf.org.br/mapa-ferroviario/">ANTF</a></figcaption></figure> <hr class="wp-block-separator"/> <h2>Rail, what is it good for?</h2> <p>Currently, the most important contribution of Brazil&#8217;s railway system comes in the mining industry. Though roads reign supreme for the transportation needs of a host of productive sectors, some 80 percent of mining-related cargo is still shipped by trains.</p> <p>In fact, data from the National Confederation of Industry (CNI) shows that much of the growth in rail transport in Brazil between 2001 and 2017 was down to mining. While the overall average expansion was 3.8 percent over the period, the amount of iron ore shipments increased 5.4 percent per year, while other cargos had annual rates of just 0.4 percent.</p> <p>Also, according to the CNI—one of the main critics of neglecting railway infrastructure—95 percent of ores mined in Brazil is transported to ports by rail. In 2018, iron ore and coal accounted for almost 98 percent of the total shipped cargo.</p> <h2>Brazilian railway system: 1950s until today</h2> <p>After a long period of expansion of Brazil&#8217;s rail network, which lasted up until the administration of Getúlio Vargas (1930–1945), the railway sector was gradually put to one side and replaced by the auto industry, principally during the government of <a href="https://brazilian.report/business/2018/05/25/truckers-protests-brazil-fuels/">Juscelino Kubitschek (1956–1961) </a>and his modernization project to push Brazil 50 years into the future in the space of just five.</p> <p>Foreign auto companies were allowed to sell in Brazil, highways were expanded, and the country began a long period of roadway expansion that would link the entire country. Railroads, however, were dismissed.</p> <p>In the 1990s, then-President Fernando Henrique Cardoso had his team analyze the Brazilian railway system. Instead of revitalizing it and offering an alternative for cargo transport, the government looked at the technologically and poorly maintained network and decided to sell it to the private sector.</p> <p>In 1996, the federal government sold off more than 10,000 km of railroads, which have since seen their productivity increase by more than 125 percent to 569 million tonnes of cargo in 2018, according to a CNI survey.</p> <p>In 2016, in his attempt to boost the sector further, then-President Michel Temer facilitated the renewal of railway concessions and amended legislation to allow money previously paid to the government as infrastructure grants to be used in new investments. The measure, which became known as cross-investment, was the administration&#8217;s solution to reverse the scenario seen between 2006 and 2013 when only 7.6 percent of funds invested in railroads were actually used to expand the network.</p> <p>The new concession plan championed by the Jair Bolsonaro government intends to increase the railway sector&#8217;s participation in Brazil&#8217;s transport network to 31 percent by 2025, and make BRL 25 billion available for investments in building new lines and extending existing ones. Including funds for the purchase of vehicles and the modernization and duplication of tracks, this total may reach BRL 100 billion, according to Vicente Abate, president of the association representing train parts companies, Abifer.</p> <div id="buzzsprout-player-1078994"></div> <script src="https://www.buzzsprout.com/299876/1078994-43-brazil-s-infrastructure-woes.js?container_id=buzzsprout-player-1078994&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>All aboard?</h2> <p>Another alternative to stimulate the growth of Brazil&#8217;s railways would be to encourage intercity passenger transport, particularly on so-called &#8220;shortline&#8221; railroads. These lines, usually measuring up to 200 kilometers, are subject to simpler regulations than those used for cargo, and can also be used to transport light goods.</p> <p>The argument against this investment would be that railway passenger transport between Brazilian cities is near non-existent. This niche of the national network accounts for only 1,000 kilometers of rail—less than 4 percent of the total—and is limited to state capitals and their metropolitan regions. Around 3.7 billion passengers are transported by trains every year in Brazil, with 70 percent of these trips taking place for work reasons. As a comparison, 8 million people use railways every day inside the city of Moscow alone.&nbsp;&nbsp;</p> <p>One factor getting in the way of investments in this mode of transport, according to Joubert Flores, president of passenger railway association ANPTrilhos, is the difficulty in convincing the political class of the projects&#8217; importance. Costs are typically high, and &#8220;the short-term mentality in Brazil gets in the way, because the projects are all long-term,&#8221; he laments.</p> <p>&#8220;We have to start with clearly viable projects,&#8221; he says. &#8220;If passengers can come and go by train, economic activity improves, and the environment is protected.&#8221;