Brazil taking steps to boost rail segment

The Brazilian government has made several announcements about the rail segment that will impact key projects.

On the regulations front, the transport ministry said it formed a working group to update the early renewal model for rail concessions.

Currently, the government and concession holders can negotiate a contract extension years before the expiration. This mechanism benefits both companies, who can hold on to their concessions without having to compete in an auction, and the government, as the extensions require firms to make new investments.

"The initiative is important because there’s still a lot of doubt regarding the extension period as in some contracts there was no provision for an extension, Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas. “In addition, it's possible [for the working group] to review deadlines and conditions that were, in some cases, difficult to comply with."

FICO 

Federal logistics firm Infra said it concluded the expropriation of 50km of land in an area where a portion of the Ferrovia de Integração do Centro-Oeste (FICO) rail project, in Goiás state, will be built.

Representing the railway’s first section, the 80km stretch will be constructed by Brazilian mining giant Vale. 

Vale now has five years to complete the project, Infra said in a statement.

With an extension of 1,641km, FICO will connect Campinorte in Goiás and Vilhena in Rondônia state. It will improve logistics for the agriculture and mining sectors in Goiás, Mato Grosso and Rondônia by creating links to ports in the north and northeast. 

In 2020 Vale obtained an early contract extension for the Carajás and Vitória-Minas rail concessions. Signed in 1997 the contracts would have expired in 2027 but were extended until 2057.

Vale agreed to pay the government 1.75bn reais (US$350mn) for the early renewal, with the funds set to be used in the FICO project.

FIOL

Infra also issued a tender notice to contract the executive engineering project for the conclusion of works on part of the West-East Integration Railroad (FIOL).

With a total extension of 1,527km, the railroad is divided into three sections: FIOL I (537km), FIOL II (485km), FIOL III (505km).

The notice is for a 142km stretch of FIOL II in Bahia state.

Infra said the government is planning to offer a concession for FIOL II this year.

The FIOL I concession is in the hands of Brazilian miner Bahia Mineração (Bamin), a subsidiary of Kazakhstan's Eurasian Resources Group. Earlier this month, the firm selected consortium TCR-10, comprising local firm Tiisa and China's CREC-10, to build a 127km stretch.