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Nestled amid the Serra do Mar coastal forests in the Brazilian state of São Paulo, the village of Paranapiacaba plays host to a railway ghost. The village was built in the mid-19th century as a company town by British-owned São Paulo Railway Company, serving as a rail station and accommodation hub for workers on the railway, which was primarily used to carry coffee from the interior to the seaport at Santos.
Having been made obsolete by new technology and sent into decline through the 20th century, the Paranapiacaba rail station today lies in ruins, an eerily decayed site of historical interest. Both in its current ruined form and its Victorian heyday – when it was considered a feat of engineering for zig-zagging across steep jungle slopes – the São Paulo Railway draws interesting comparisons with Brazil’s modern-day rail freight system, which, despite billions in investment and decades of development, is still struggling to deliver the economic benefits it promises, and in some places approaches Paranapiacaba in its neglect and disuse.
Given Brazil’s sheer size – at around 8.5 million square kilometres it is the world’s fifth-largest nation, just behind China – the potential benefits of a reliable, well-implemented rail cargo network have been clear for decades. But for years, project mismanagement has held back the development of a network that properly serves Brazilian businesses, creating a legacy that has seen railways sidelined among the country’s transport infrastructure, with an over-reliance on roads to keep freight moving.
Brazilian railways: decades of disrepair
In late May, Brazil’s economic reliance on its roads was thrown into sharp relief when a 10-day nationwide strike and blockade by truck drivers over fuel prices brought the supply chain to a standstill. The impact of the strike, which has been estimated to have cost the shipping industry between $5bn and $15bn in lost revenues, was exacerbated by a lack of alternative rail routes for moving goods.
According to estimates, just over 20% of Brazil’s total cargo is carried by rail, with 63% transported by highways. Freight rail is dominated by the transport of raw materials, primarily iron ore and agricultural produce such as soy and corn. In terms of containerised cargo, Brazil’s railways are even more marginalised, with just 3%-4% of cargo containers moved by rail; the federal government has an aim to increase this share to 20%. With the higher costs and potential for delays involved with hauling freight by truck, a broad transition of investment towards rail freight is badly needed.
“We have a lot of goods with low added-value and at huge volumes, like soybean and corn, being transported on highways over long distances and this generates huge costs for all of them,” said infrastructure expert Paulo Resende in a May interview with BNamericas. “It would be better if these types of products were transported on railways, leaving the roads free to transport products at lower volumes, with lower weights and higher added-value.”
“Freight rail is dominated by the transport of raw materials, primarily iron ore and agricultural produce.”
One of the main reasons for Brazilian rail freight’s second-class status is the crumbling state of many of the country’s lines. The country has built more than 37,000km of track since the late 1950s, but a third of those lines are reportedly now abandoned, and another third are operating well below capacity. Projects have languished, incomplete, for years, and the condition of many lines has deteriorated as decades of prioritising road over rail – especially by the military government that ruled from 1964 to 1985 – come back to bite. According to data from McKinsey, Brazil spends around 2.5% of its gross domestic product on infrastructure, proportionately less than a third of infrastructure spending in China and around half of what is spent in India.
State and federal governments of recent years have promised solutions, but have struggled to deliver, especially after recently emerging from the country’s worst recession in decades.
“We absolutely must increase the number of containers, and cargo in general, that are moved by railroad,” an unnamed shipping agent at the Port of Santos told the Journal of Commerce’s website in July. “Every year, politicians both here in Santos and in Brasilia make promises to increase the percentage of boxes to be moved by railroad, and every year almost nothing happens.”
Several stalling mega-projects, including the 1,700km Transnordestina project and the North-South Railway (Ferrovia Norte-Sul, or FNS) have become emblems of Brazil’s rail infrastructure woes. The FNS project began construction back in 1987, intended as a 1,500km backbone running down the centre of Brazil’s landmass from the state of Tocantins to Anápolis, a major transport hub to the south west of Brazil. Decades of delays, financing issues and allegations of corruption meant that the first 855km section of the line wasn’t inaugurated until May 2014, while the final 682km stretch to Estrela D’Oeste is still in the final stages of construction, with completion expected later this year.
“It’s a mess; a series of errors and bottlenecks,” transport consultant Edson Tavares told the Inter Press Service in January. The FNS is, in many ways, a manifestation of the poor overall planning that has hampered the national rollout of new railways; a subsidiary of Brazilian mining company Vale is the sole concessionaire on the line, able to transport iron ore to the Port of São Luis for export via a passage rights on the Carajás Railway.
As the FNS runs through the centre of the country, it relies on links with other lines to reach the all-important Atlantic ports that facilitate export, primarily to China. Without more connections, the original criticisms from before the project started that the FNS would be a route “from the middle of nowhere to nowhere” are starting to look more practical than satirical.
The FNS’s capacity concerns may be alleviated by the strong growth of the soy production industry in Tocantins, which has increased its output from 911,000 tonnes in 2008 to 2.8 million tonnes a decade later. Even so, experts have noted that current demand from soy producers would still not make the line financially viable, so additional work and careful facilitation of investments will be needed for the FNS to avoid white elephant status.
Rail rescue: attracting investment
Traditionally, opportunities to build infrastructure in developing economies have been popular among foreign investors, but Brazil’s regulations, poor project management and uncertain political climate have cooled international enthusiasm for building Brazilian railways, with several recent tenders – particularly for passenger routes – having to be delayed due to lack of interest.
“The lack of well-prepared projects means that risks are not well understood, leading to delays during implementation and often substantial cost increases,” said the World Bank’s country director for Brazil in a November interview with the Brazilian transport federation. “In addition, investors are discouraged by regulatory uncertainties, and the preparation, contracting and governance of concessions and PPPs are hampered by the government’s poor capacity.”
Brazilian President Michel Temer has spent much of his controversial term of office attempting to create a more investment-friendly landscape for infrastructure projects. This year he approved 14 infrastructure projects as part of the Investment Partnerships Program, placing priority on rail projects, including the Ferroanel in São Paulo state and the Centro-Oeste Railway (Fico). Vale and logistics group MRS will invest in Fico – connecting the FNS with Água Boa in Mato Grosso state – and Ferroanel, respectively, as part of their agreements to extend existing railway concessions.
“The lack of well-prepared projects means that risks are not well understood, leading to delays during implementation.”
“Our goal is to increase rail capacity by 100% within four years,” said Secretary-General of the Presidency Ronaldo Fonseca.
An optimistic aim, certainly, but international investors are waiting to be wooed to get some of the country’s most infamous rail projects finished, and new projects started. Last year it was reported that the government was in talks with Italian investors to fund the completion of Transnordestina, while Chinese companies have resolutely stuck around in Brazil to win projects amid growing suspicion from within the country.
Uncertainty abounds for the future of Brazilian rail infrastructure. It has the potential to be a great facilitator of key cargo exports, as it has in other developing nations, but successive governments have become so entangled with poorly planned mega-projects that unpicking the mess and moving forward with an achievable development programme will be an uphill struggle. With President Temer embroiled in his own corruption scandal after the impeachment of his predecessor Dilma Rousseff, his approval rating with voters has dropped to record lows in the run-up to the country’s general elections in October. Whoever wins the presidency this year will have a major job on their hands to ensure Brazil’s creaking rail infrastructure isn’t on the fast track to nowhere.
The post Brazil’s rail freight network: fast track to nowhere? appeared first on Railway Technology.
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