Spotlight: Why there is hope for Brazil’s largest subway PPP

The government of São Paulo state has seen its hopes of finding a solution for new subway line No. 6  improve due to renewed interest from foreign investors. 

Three international groups have presented proposals to buy into the PPP project, the government said in a statement without revealing their names.

The government is looking to replace its current PPP partner, the local Move São Paulo consortium.  

Groups from the US and Europe are among the interested parties, a state government spokesperson told BNamericas.

There is also interest from China. During an official visit to the Asian nation, last week, São Paulo governor João Doria signed a memorandum of understanding with CR20, a subsidiary of infrastructure giant China Railway Construction Corporation (CRCC). 

The MOU represents an expression of interest from the Chinese company to participate in the line No. 6 works and other projects. 

CONTRACT EXTENSION

The new expressions of interest prompted the government to extend the contract's expiration date to November 11 in order to avoid having to launch a new tender - a process that could take many months.

In December 2018, the government had announced its decision to terminate the contract with Move São Paulo and it was supposed to expire this month.

The contract extension will provide the necessary time for negotiations between Move São Paulo and the new investors, with the government also playing a role.

“Although it is a negotiation between private companies the interest is public. For the population of São Paulo, which is waiting and needing completion of the line 6-orange works, it would be better if the Move São Paulo consortium succeeded in selling its stake in the PPP since this is the fastest and least costly way to resume the works, which is currently the largest infrastructure project in Brazil,” said Alexandre Baldy, the state's transport secretary. 

A PROJECT UNDER SUSPENSION 

Announced in 2008, line No. 6 was Brazil's first PPP for building and operating a subway line.

At a cost of 9.9bn reais (currently US$2.53bn), the 15.3km line will have 15 stations and run between the Brasilândia and São Joaquim neighborhoods.

Works started in 2015 but have been halted since September 2016 and the project is only 15% complete.

Suspension of the works came after members of the consortium holding the contract came under scrutiny in the massive Lava Jato corruption probe, which caused them financial problems.

Move São Paulo comprises investment funds and local engineering companies Odebrecht Transport, Queiroz Galvão and UTC.

The troubled consortium had earlier tried to bring in new partners such as China Railway Capital and China Railway First. However, after assessing the project last year both decided against participating.