Alexandre Rocha, Geovana Pagel and Marina Sarruf*
São Paulo – Holders of railway concessions intend to continue investing, and even plan to invest heavier than they have been over the last 10 years, since privatisations. According to information supplied by the National Association of Railway Transport (ANTF), operators are going to invests over R$ 10 billion (US$ 4.6 billion, all dollar values at current exchange rates) in the system by the end of the decade.
“Within a strategic plan, the forecast for this year is for investment of R$ 2.351 billion (approximately US$ 1.1 billion). From 2007 to 2010 investment should exceed R$ 2 billion (US$ 930 million) a year,” stated the executive director of the ANTF, Rodrigo Vilaça. Since 1996, companies have invested R$ 11 billion (US$ 5.1 billion). According to Vilaça, future investment is also going to be concentrated on recovery and maintenance of railways, purchase of railcars and locomotives and on technology.
In all there are eight private companies operating in a total of 11 grids all around the country. There is another company, state-owned company Valec, which operates the only railway that still belongs to the government, the North-South railway. The Ministry of Transportation, however, intends to execute a tender for the sub concession of the line in the first half of this year.
Heavy investment
One of the concession holders that intends to continue investing heavily is MRS Logística, which controls 1,674 kilometres of the Southeaster Grid of the former Federal Railway Network (RFFSA) in the southeastern Brazilian states of Minas Gerais, Rio de Janeiro and São Paulo. “Last year investment totalled R$ 400 million (US$ 186 million) and this year it will total R$ 650 million (US$ 302 million). By 2009 we should invest around R$ 2.9 billion (US$ 1.3 billion),” stated company president Julio Fontana Neto.
According to him, the capital will be invested mainly in the purchase of material for operation on tracks and in technology. In the first months of 2006 the company has already purchased 250 railcars and ordered 50 locomotives to GE, each costing US$ 2 million. In March, the company signed a US$ 70 million contract for the replacement of their sign and telecommunications system.
“Within the infrastructure area we are duplicating stretches and building patios for trains,” stated Fontana. The company is currently working, for example, on the duplication of 100 kilometres of railway lines between the cities of Barra Mansa and Sepetiba Port, in Rio de Janeiro.
With this, the company intends to reach 2010 with a capacity for transport of between 250 million and 270 million tonnes of cargo. For comparison purposes, last year all the holders of concessions in Brazil transported 392 million tonnes and MRS alone, 108.5 million. The licensee generates 3,100 direct jobs and had revenues of R$ 2 billion (US$ 930 million) in 2005.
Partnerships with clients
Another company forecasting heavy investment is América Latina Logística (ALL), which manages 7,185 kilometres of the former RFFSA railway lines in Rio Grande do Sul, Santa Catarina and Paraná, in southern Brazil, and São Paulo. Between 1997 and 2003 the company invested R$ 100 million (US$ 46.5 million) a year in their operations, another R$ 188 million (US$ 87.4 million) in 2004 and R$ 255 million (US$ 119 million) in 2005. This year the company intends to invest R$ 250 million (US$ 116 million), plus another R$ 200 million (US$ 93 million) in customer funds to be used for the purchase of railcars.
According to the financial manager at ALL, Carlos Augusto Moreira, since 2004 the company has been working in the following way: it invests in the purchase of locomotives and in the maintenance of the grid, and its customers purchase the railcars. “Since then, 40 locomotives and 1,000 railcars have been added a year and we intend to maintain this average,” stated Moreira.
And this model of partnership with clients is going very far. In October 2004, ALL signed a contract with Bunge Alimentos to transport agricultural products in bulk for a period of 23 years. The agreement forecasts the transport of 50 million tonnes from 2005 to 2010 and another 220 million between 2010 and 2027. The agreement should generate annual revenues of between R$ 270 million (US$ 126 million) and R$ 350 million (US$ 163 million) for ALL. After 2010, the value should rise to R$ 400 million (US$ 186 million).
More than a railway logistics company, ALL also has a fleet of 1,986 trailers and lorries. “A country like Brazil must use all integrated models,” stated the president of the Brazilian Association of Railway Industries (Abifer), Luís Cesário Amaro da Silveira.
The company says that its differential is the offer of different logistics services: railway and highway transport and storage services. Another differential is that ALL is the only Brazilian operator to have railway lines outside the country, a total of 9,212 kilometres in Argentina. The company employs 3,000 people and had revenues of R$ 1.2 billion (US$ 558 million) in 2005.
Even ports
MRS and ALL are companies that even operate railway lines within ports, making it possible for the cargo to arrive at the vessel. MRS, for example, operates lines in the ports of Sepetiba and Santos (respectively in Rio de Janeiro and São Paulo), and ALL in the port of Rio Grande, in Rio Grande do Sul, São Francisco do Sul, in Santa Catarina, and Paranaguá, in Paraná.
Another company that operates in Santos port is Brasil Ferrovias, which controls Ferronorte, in the states of Mato Grosso and Mato Grosso do Sul (in midwestern Brazil), and Ferroban, in São Paulo. Brasil Ferrovias is responsible for transporting a significant part of the agricultural produce of Mato Grosso, one of the main agricultural producers in the country, to Santos Port.
Brasil Ferrovias
Ferronorte was the brainchild of businessman Olacyr de Moraes, who was once considered the “King of Soy” in the country. The railway goes from the border of São Paulo and Mato Grosso do Sul to the city of Alto Araguaia, in the south of Mato Grosso. Under financial difficulties, Brasil Ferrovias underwent financial restructuring and last year was practically taken over by the government, with the Brazilian Development Bank (BNDES) taking over control of 46.6% of the company capital, together with pension funds of state-owned companies.
Brazil Ferrovias and Novoeste, a railway that crosses São Paulo and Mato Grosso do Sul, reaching the frontiers with Bolivia and Paraguay, were recently tendered. The bids are still being analysed by the shareholders.
Read in the link below more information about the expansion of the grid and tomorrow read about the rebirth of the railway industry.
*Translated by Mark Ament
