Railway project delays and corruption keep Brazil off the tracks

. Sep 25, 2020
Railway project delays and corruption keep Brazil off the tracks Railway bridge in Rio Grande do Sul. Photo: Paulo de Abreu/Shutterstock

Along with a large part of the world, Brazil adopted railway transport at the end of the 19th century, importing British technology, designs, and materials. The first Brazilian railway began operations in 1854, located in the interior of São Paulo state, before the mode of transport spread countrywide. The peak of Brazil’s rail network came during the presidency of Juscelino Kubitschek (1956-1961), reaching 32,287 kilometers before the military dictatorship began eradicating railways deemed to be “deficient.”

As a result, at the end of the 1980s, Brazil had practically no passenger railways, despite its huge size and population. The only long-distance train line of the sort connects the southeastern cities of Belo Horizonte and Vitória and is operated by mining company Vale.

</p> <p>Of the approximately 30,000 km of railway lines in Brazil, 29,000 km are privately owned. To give an idea of the relative insignificance of railways in the company, only 5.4 percent of Brazil&#8217;s industrial production is transported by train; 75 percent is moved on roads, according to Fundação Dom Gaspar.</p> <p>The impacts caused by a truck driver’s strike in 2018 laid bare Brazil&#8217;s dependence on roadway transport and sparked a public debate on the need to expand the country&#8217;s railway system. However, little has changed since. Flawed planning, an absence of political will, lack of funds, and corruption have all kept Brazil from getting back on the tracks.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1226768" data-url="" aria-label=""><script src=""></script></div> <h2>The northeastern pipe dream</h2> <p>The federal government&#8217;s most recent gamble in the field of rail transport is the so-called Transnordestina line, which is not a particularly novel idea. The endeavor seeks to develop cargo logistics in the Northeast region, taking a line through 81 municipalities in three states, starting from Eliseu Martins in Piauí and heading toward the ports of Pecém, in Ceará, and Suape, in Pernambuco.</p> <p>The project began with an official ceremony in June 2006, when then-President Luiz Inácio Lula da Silva laid the cornerstone in Missão Velha, in Ceará. The plan was for trains to be in operation by 2010, with an investment of BRL 4.5 billion — BRL 10.8 billion (USD 1.9 billion) in today&#8217;s money.</p> <p>However, since it began, the project has been a mix of hope and dashed ambitions. Hope, for what the new railway could represent for the Northeast, Brazil&#8217;s poorest region. Disappointment, on the other hand, for the constant interruptions and complaints of misused funds.</p> <p>The Transnordestina (Transnortheast) project is a private endeavor — led by steel-maker Companhia Siderúrgica Nacional (CSN) — but it is funded with public money. So far, <a href="">work stoppages</a> have occurred due to legal issues, squabbles among CSN partners, and a lack of money from the government. Construction has already swallowed up BRL 6.9 billion — over half of the total forecast — but only 30 percent of the project has been completed. There is no guarantee that the remaining BRL 4 billion will be released to finish construction.</p> <iframe src="" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <p>In 2017, the Federal Accounts Court (TCU) blocked all federal government entities from sending funds to the endeavor until they received detailed projects and budgets from CSN. Two years later, part of construction resumed on the stretch of rail between the states of Piauí and Ceará, but work remains stopped in Pernambuco, where the majority of the future railway is located. In that state, two segments of the track have been completed, between the cities of Trindade, Salgueiro, and Custódia. For much of the unfinished project, definitive routes have not even been finalized and there is no guarantee of funds for this to take place.</p> <p>In Ceará, works were divided into 11 blocks. So far, work has only been done on two of them. Since resuming construction in 2019, the project is already grinding to a halt once again.</p> <p>As a result of these constant delays, the Brazilian Land Transport Agency (ANTT) issued a proposal to the Infrastructure Ministry in March that would determine the termination of the railway&#8217;s concession contract. In other words, the regulatory agency wants new deals to be signed before work may continue. The ministry has yet to reply and has shown no indication of doing so soon.</p> <h2>A railway 35 years in the making</h2> <p>While the Transnordestina project has been plagued with delays and controversy, it pales in comparison to the problems encountered with the Ferrovia Norte-Sul (North-South Railway), which was drawn up 35 years ago as the new backbone of Brazil&#8217;s railway network. However, since its inception, the project has suffered from flawed execution and design, as well as a large helping of corruption.</p> <p>Announced in 1985, the line was initially projected as a 1,550 km track between Açailândia in the Northeast to Anápolis in the Center-West state of Goiás. The awarding of the contract was shrouded in controversy, with allegations of being rigged to favor the winning construction firms — which, three decades later, would find themselves in the middle of Brazil&#8217;s largest corruption scandal in history, uncovered by Operation Car Wash.</p> <p>Over time, the planned construction grew and grew, eventually turning into a hypothetical 4,500 km line linking Brazil&#8217;s North and South regions. However, 35 years since it was conceived, only one-quarter of the project has been completed, and the finished tracks are seldom used. According to state-owned company Valec Engenharia, Construções e Ferrovias — in charge of the Norte-Sul railway — BRL 12.5 billion has been invested in the project so far.&nbsp;</p> <p>According to investigations, much of the corruption that hindered the progress of the Ferrovia Norte-Sul is down to the fact that the entire grand operation is controlled and overseen by Valec. Beyond simply coordinating the works, Valec is also in charge of operating the railway, setting prices and essentially auditing itself. Unsatisfied with the freight charges demanded by the state-owned firm, agricultural companies and other producers have opted to continue hiring private trucking firms to transport their output to ports. Beyond this, it didn&#8217;t take long for investigators to find proof of public money being embezzled by Valec executives.</p> <p>The biggest such corruption scheme was led by engineer and politician José Francisco das Neves — commonly known as Juquinha das Neves — who led Valec between 2003 and 2011. Last May, Juquinha and six other people became defendants in a case accusing the group of overpricing contracts in the stretch of railway that passes through Goiás, Juquinha&#8217;s home state. Investigations showed that construction companies formed a cartel to rig prices and offer anti-competitive proposals to give the impression that auctions were being conducted fairly. Public prosecutors estimate that this scheme caused losses of over BRL 76 million to the public coffers.</p> <h2>Government gambling on private concessions</h2> <p>Today, the Norte-Sul railway project is split into three parts. In March 2019, at the beginning of the Jair Bolsonaro administration, two of these segments were awarded to Rumo Logística in a 30-year non-renewable contract costing BRL 2.7 billion — 100.29 percent more than the minimum bid of BRL 1.3 billion.</p> <p>The remaining segment was surrendered by Valec back in October 2007, which awarded it to mining giant Vale. The firm was the only interested party in the auction, paying the minimum price of BRL 1.5 billion.</p> <p>Researchers in mobility have long complained about Brazil&#8217;s lack of railway projects that involve passenger transport. Experts consulted by <strong>The Brazilian Report </strong>say that the Transnordestina and Norte-Sul initiatives could go far beyond simply transporting cargo, without the need for significant further investment. </p> <p>One such specialist, Marcelo Dourado, laments the poor decisions made by Brazilian authorities concerning public rail transport. &#8220;Brazil is the only continent-sized country without a national passenger rail network. It&#8217;s also the only continent-sized country that reduced the size of its railway network over the last century. This is deplorable from all points of view.&#8221;

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Renato Alves

Renato Alves is a Brazilian journalist who has worked for Correio Braziliense and Crusoé.

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