Alexandre Rocha, Geovana Pagel and Marina Sarruf*
São Paulo – Railway transport is considered the ideal means for great distances and for cargo in bulk, like grain and ore. Brazil, a country of continental dimensions, a great agricultural producer, and a country of great mineral riches, however, seems to have ignored this fact for decades, having let its railway lines, which once totalled 38,000 kilometres in length, to fall to decadence. In the second half of last century, the country made a clear option for the transport of most cargo on lorry trailers.
The importance of railways in the Brazilian transport matrix fell and reached 19% in the 1990’s. In turn, other nations with large territories, like the United States, Canada and Australia, transport over 40% of their cargo on trains. In India, the percentage rises as high as 50% and in Russia it is over 80%.
Apart from that, for great distances, according to specialists, the cost of highway freight is three times as much as railway freight. "As logistics costs with railways and waterways are lower, a study by the Inter-American Development Bank (IDB) shows that Brazil would economize over US$ 2 billion if it opted for these models,” stated the director of the Transport Planning and Policy Evaluation Department at the Ministry of Transportation, Francisco Luiz Baptista Costa.
More than seeing assets built over decades falling to bits, Brazil also lost a great part of its railway industry, a sector that in the 1970’s produced on average 3,000 wagons a year and that in the 1990’s produced less than 200.
This panorama started changing in 1996, when railways, which had been taken over by the government in the 1950’s, were privatized. Of the original 38,000 original kilometres, 28,500 remained. "What happened in the mean time I do not know,” stated the executive director of the National Association of Railway Transport (ANTF), Rodrigo Vilaça.
Leap in 10 years
From then on Brazil started getting onto the right track again. According to the ANTF, in the last 10 years the privatized companies have invested R$ 11 billion (US$ 5.1 billion, all figures at current exchange rates) in the purchase of wagons and locomotives and in technology. This caused the total volume of cargo transported on railways to rise from 256 million tonnes in 1997 to 392 million last year. The participation of the sector in the national transport grid rose to 26% in 2005.
The revitalization of railways also rekindled the industry. Ancient companies gained new blood, even foreign, as is the case with the National Railcar Factory (FNV) and Cobrasma, which currently belong to a joint venture between North American Amsted Industries and the Brazilian Iochpe Maxion. New companies also started operating in the field, like Randon, a traditional maker of highway trailers, and Santa Fé, a partnership between América Latina Logística (ALL) and Indian group Besco.
With this, the Brazilian industry reached in 2005 a record figure of 7,500 wagons produced, and currently generates around 30,000 direct and indirect jobs. The industry has even consolidated itself as an export platform for multinational companies.
Behind the rebirth of railways is an enormous demand for logistics services that highways could no longer supply, caused by an increase in production of grain and of more and more dynamic foreign trade.
"Two factors were very important for this revitalization: the need for transport of material in bulk, especially soy, and the increase of ironworks production in the country, with the need for transport of calcite, coal and ores,” stated the president of the Brazilian Association of Railway Industries (Abifer), Luís Cesário Amaro da Silveira.
Towards the future
All of this was done without significantly increasing the railway grid, but just operating the system better. And operators intend to continue investing in modernization, in the material in operation and in technology. MRS Logística alone, which operates the grid in the southeast of the country, formerly operated by the Federal Railway Network (RFFSA), intends to invest R$ 2.9 billion (US$ 1.4 billion) up to 2009.
The target of the operators is to reach 2008 moving 28% of Brazilian cargo. "We may reach 30% if the government helps,” stated Rodrigo Vilaça. The bet on the continuation of growth is greatly due to the fact that users have returned to trusting in the system and the demand only tends to grow. A proof of this is the 23 year contract that ALL, which operates the railway grid in the south of the country, closed with Bunge Alimentos to transport their agricultural produce.
Opinions vary regarding the ideal participation of railways in the transport system in the country. To the ANTF it should be around 40%, but it must not be forgotten that the country also has a very great potential for the use of waterways and of coastwise navigation that is still very little exploited.
After recuperation, the second phase of the revitalization process, which is the responsibility of the government, is the removal of bottlenecks, like railway crossings and invasion of railway areas by families, obliging trains to travel slowly over various stretches, increasing the possibility of accidents.
The third phase, also supposedly in the hands of the government, is expansion of the railway grid. This includes projects like the expansion of the North-South Railway; the South Coastal, a 165 kilometre stretch in the southeastern Brazilian state of Espírito Santo, to cost R$ 700 million (US$ 327 million); and the largest of all, the Transnordestina, a railway to cover a distance of almost 2,000 kilometres in northeastern Brazil (955 already existing and 905 to be built), estimated at R$ 4.5 billion (US$ 2.1 billion).
According to Vilaça, if all takes place without hindrance, the sector imagines that the railway grid may rise to 34,500 kilometres by 2012. For this, however, investment of R$ 9 billion (US$ 4.2 billion) will be necessary. “But ideally, in a country like ours, for growth to be taken to the interior, the railway grid would have to total at least 50,000 kilometres,” he said.
Tomorrow (11) read an article in ANBA about the part played by the private sector in the revitalization and in the future of railways. In the link below, a little more about the history of trains in the country.
*Translated by Mark Ament
