Why São Paulo state could suffer a logistics collapse

São Paulo, Brazil's wealthiest and most populous state, has the largest transport and logistics infrastructure in the country but it is at risk of collapsing, according to a report.

The state’s influential engineering and agronomy council (Crea-SP) recently delivered a report to the state government that identified the biggest problems while also offering solutions.

In this interview, Crea-SP president Vinicius Marchese talks with BNamericas about the report’s findings and what to expect on the infrastructure front during the administration of new state governor Tarcísio de Freitas.

The full report can be seen using this link.

 

BNamericas: Crea-SP recently delivered a report to the state government pointing out the risks of a collapse in the logistics system. In your view, what are the priority projects to avoid this collapse?

Marchese: In the report that we submitted to the state government our team compiled various data, showing that we urgently need to give continuity to some projects, one example being the conclusion of the construction of the northern section of the Rodoanel [highway]. This needs to be completed as it will be important for the flow of production.

We also included, among others, the construction of a railway ring around the metropolitan region. We have concrete problems in logistics, but the existence of these projects shows that we have mechanisms to solve this.

BNamericas: In addition to these two, what other projects were mentioned in the report?

Marchese: We also have to solve bottlenecks that connect the metropolitan region with the region of [coastal city] Santos, which is where the port of Santos is located. We must solve the problems related to connections between coastal cities.

To move forward with these projects, we will need political will since they are existing projects that do not need to be created.

BNamericas: Do you expect more concessions and PPPs under governor Tarcisio de Freitas?

Marchese: In addition to being a former infrastructure minister with many accomplishments, he is also a [civil] engineer and that brings me great hope that he will be very attentive to these issues.

At the ministry, he used the model of concessions and PPPs a lot to speed up projects.

I think the PPP model is excellent because you have both sides coming together, the public and the private sector. I believe that Tarcisio will speed up the PPP and concessions agenda.

BNamericas: Most infrastructure business leaders in Brazil have called for more public investment in the infrastructure area, and not just through PPPs and concessions. Is this also a necessity for São Paulo?

Marchese: There is no doubt that São Paulo will also need direct public investment in infrastructure.

São Paulo is the state that is viewed as the country’s locomotive and a large part of this is due to the state’s existing logistics. But yes, to improve this logistics and maintain this status we need more public investment in those projects where the private sector has no interest, but which are important for the population.

BNamericas: Brazil has a chronic problem of depending heavily on road freight transport. Does this also affect São Paulo?

Marchese: The state has a transport matrix that is mostly made up by road transport. About 90% of the cargo transported in the state is via road.

There is a major need to resume investments in the rail network and we could even solve part of this problem quickly, since there is a significant extension of abandoned rails. But we would need political will.

The state has great potential in the road and rail modalities, but not so much in terms of waterways.

BNamericas: Recently the state audit court said there are 762 works that are delayed or paralyzed. How can this number be reduced?

Marchese: The question of paralyzed works is linked to several problems, and it is difficult to point at a single and more general problem. There are bureaucratic problems in some projects, in others there are problems of corruption. So this can only be solved by carrying out a case-by-case assessment.

Here we also need political will to have more supervision from the control bodies, as well as from society, so that these projects are resumed.

BNamericas: The central bank recently signaled that the key interest rate will likely remain at a high level for longer than initially expected. How does this affect the infrastructure sector?

Marchese: High interest rates are not good for those who work with infrastructure, but this must be a deeper economic discussion.

It is of no use just looking at the infrastructure side, we must consider the economic imbalances that exist that make the central bank adopt this interest rate strategy, as it is an inflation issue.

BNamericas: How can the fact that Freitas and President Luiz Inácio Lula da Silva belong to antagonistic political sides affect the state’s infrastructure agenda?

Marchese: There is of course a need for them to maintain a good institutional relationship, which, despite political differences should be aimed at improving people's lives.

We decided to submit our logistics report to the state’s government secretary, Gilberto Kassab, because he is a person who can make a big difference in this relationship.

I really believe in Kassab's ability and in his coordination power to lead and create good relationships.

Editor’s note: Kassab is president of the centrist PSD party that is part of the coalition that supports the Lula government.