FCA Negotiates Changes to Contracts - Brazil

Published: Tuesday, October 16, 2001 17:54 (GMT -0400)More news from Brazil

By Business News Americas staff reporters

Vote

Result

0 votes

Related content

Companies / Entities

Keywords

Railroads | Government/Regulations | Financing

Brazilian railroad operator Ferrovia Centro Atlantica (FCA) wants to renegotiate its current concession contract with the Transport Ministry to secure less stringent goals for volume of cargo transported and a new interpretation of safety standards, FCA president Thiers Manzano Barsotti said, quoted by Valor Economico.

FCA signed its concession contract five years ago this month, which therefore allows it to start renegotiating the terms. The current land transport secretary, Luiz Henrique Baldez, is reviewing document.

A response is expected in two weeks, although a lot of the Transport Ministry's work has ground to a halt over the last month as it prepares to overhaul its own structure and launch a number of new regulators for the transport sector. Political indecision and bureaucratic delays have held up a number of critical issues, including the revision of railroad contracts and the award of highway maintenance contracts, a Transport Ministry spokesperson told BNamericas.com.

The government has reportedly rejected calls from FCA for federal financing for expansion of its network, which will reach full capacity in 2004. Operators have long complained that the current concession contracts discourage investments in building new track, and FCA challenged the government to provide financing.

FCA also wants the goals for increasing cargo volume to be tied to the growth of gross domestic product (GDP), so that if the economy slows down, the railroad operator's targets will also be reduced.

Baldez is reported to have rejected this suggestion, saying railroads must increase their 18% share of the existing cargo market in Brazil. FCA transported 5.3 billion TKU in 1997, the first year of the concession, and expects to transport a total of 8.8 billion TKU in 2001.

FCA has also asked for the interpretation of accidents to be revised: the company wants derailings to be excluded from the list of accidents. Derailings occur frequently and are usually the result of simple problems that are easily solved, FCA corporate relations director Luiz Paulo Serrano said.

The government has refused to negotiate with another Brazilian railroad operator, Novoeste, despite reaching the five-year mark in August, as it has not paid its fees under the concession terms since 2000.

Railroad operator MRS will be the next to begin negotiations when it reaches the five-year mark in December.

Add your Comment

Conversation guidelines: Business News Americas welcomes your opinions related to this article. However, all comments are moderated. Please stay on topic and be respectful of others.