Brazil’s new logistics plan, explained

. Jul 09, 2018
brazil logistics plan infrastructure Brazil's government launched a new logistics plan
brazil logistics plan infrastructure

Brazil’s government launched a new logistics plan

Late in May 2018, Brazil edged closer to collapse. As truckers downed tools in protest against rising diesel prices, the country all but stopped. According to early estimates, Brazilian agribusiness lost over BRL 5 billion owing to the industry’s inability to distribute produce and receive much-needed supplies. The true impact of the strike, however, has yet to be assessed. According to the Institute of Applied Economics, the strike hit Brazil’s industrial activity harder than the 2008-2009 global economic crisis.

The crisis shed light on an age-old problem in Brazil: the country is extremely dependent on trucks for cargo transportation. It also furthered the image crisis of Michel Temer’s administration – which already boasts the worst approval ratings in Brazil’s democratic history.

But no one can accuse Mr. Temer of not trying to turn things around – even if, so far, he has spectacularly failed at every turn. His latest attempt is a National Logistics Plan, which promises to lower Brazil’s dependence on trucks for cargo transportation.

</span></p> <p><span style="font-weight: 400;">The plan was first conceived in 2012, when Dilma Rousseff was still Brazil&#8217;s president. The government then began a series of studies in partnership with private ventures to determine how Brazil could improve its </span><a href=""><span style="font-weight: 400;">deficient infrastructure sector</span></a><span style="font-weight: 400;">. However, as the political crisis during Ms. Rousseff&#8217;s government got worse, the plan was sidelined. Until Mr. Temer took over, after a controversial impeachment process.</span></p> <h3>The National Logistics Plan&#8217;s main proposals</h3> <p><span style="font-weight: 400;">The studies that form the foundations of the logistics plan were finished in March 2018 and indicate </span><a href=""><span style="font-weight: 400;">where Brazil should invest</span></a><span style="font-weight: 400;">. </span></p> <p><span style="font-weight: 400;">The first phase runs until 2025 and includes projects on three railroads, seven highways, five ports, and 13 airports. Contracts for these infrastructure projects should go on public sale before the end of the year and will generate over BRL 100 billion in new investments. </span></p> <h4>Main projects ahead</h4> <h4><span style="font-weight: 400;">RAIL</span></h4> <ul> <li><span style="font-weight: 400;">EF-151: a railroad crossing the country from north to south;</span></li> <li><span style="font-weight: 400;">EF-170: will connect the states of Mato Grosso (major agricultural producer) and Pará (home of one of Brazil&#8217;s main ports);</span></li> </ul> <h4><span style="font-weight: 400;">HIGHWAYS</span></h4> <ul> <li><span style="font-weight: 400;">BR-246: connecting northern cities Porto Velho and Comodoro;</span></li> <li><span style="font-weight: 400;">BR-364: connects Minas Gerais and Goiás;</span></li> <li><span style="font-weight: 400;">BR-140: the stretch contemplated in the plan connects Minas Gerais to Rio de Janeiro;</span></li> </ul> <h4><span style="font-weight: 400;">AIRPORTS</span></h4> <ul> <li><span style="font-weight: 400;">All 13 airports that will be part of the concessions plan are in the Northeast, Center-west and Southeast.</span></li> </ul> <p><span style="font-weight: 400;">Money will be raised by private companies, by way of concessions &#8211; in exchange for building railroads or highways, companies gain the right to administer toll fares for a number of years. These concessions were given to the company with the highest bid &#8211; or that which will charge the lowest amount of money from users in toll fares.</span></p> <p><span style="font-weight: 400;">The government expects to save up to BRL 54.7 billion every year in infrastructure costs. &#8220;Our goal is to increase the capacity of transporting cargo through trains by 100 percent within the next four years,&#8221; said Ronaldo Fonseca, the President&#8217;s Secretary-General.</span></p> <p><span style="font-weight: 400;">All auctions, however, should happen next year &#8211; when Brazil will have a new president. A governing body to manage the infrastructure plan will be created to (at least in theory) curb political influence over these projects. However, members of that committee will all be politically appointed: the ministers of Transportation, Mines &amp; Energy, Planning, the President&#8217;s Chief of Staff, and the Federal Logistics Company.</span></p> <h3>Back to the railroad</h3> <p><span style="font-weight: 400;">Until the 1920s, Brazil&#8217;s main mode of transport &#8211; for both passengers and cargo &#8211; was the railroad. That scenario began to change under President Washington Luís, whose administration was marked by heavy investments in roadways &#8211; connecting Rio de Janeiro, the then capital city, to some of the country&#8217;s main centers.</span></p> <p><span style="font-weight: 400;">Subsequent administrations continued this trend, favoring roadways over rails. During the military dictatorship that ruled Brazil between 1964 and 1985, several railroads were deactivated. Due to lack of investments, they decayed and had little demand from passengers and transportation companies.</span></p> <p><span style="font-weight: 400;">In the 1990s, Brazil completely gave up on railways, handing over its entire network to private corporations, such as mining firm Vale. Since then, trains are almost exclusively used for cargo.

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