Inauguration of Brazil’s Norte-Sul railway set to trigger new investments

Brazil has inaugurated one of its most emblematic rail projects, the Norte-Sul railway, at a time when it is evaluating measures to boost investments in the sector.

"In two months we will launch a detailed initiative for the rail area, as we did recently with the road area,” George André Palermo Santoro, executive secretary at the transport ministry, told BNamericas.

President Luiz Inácio Lula da Silva cut the ribbon on Friday for the line between the ports of Itaqui, in Maranhão state, and Santos, in São Paulo. 

Norte-Sul (north-south) is divided into three stretches with concession contracts held by logistics firms Rumo and VLI, with state-run Valec also being an operator.

"After more than 30 years, the Norte-Sul railway will become a reality and help boost development in the midwest region, which is fundamental for agriculture and livestock," the government said in a statement.

The railway has an extension of 2,257km and crosses four regions. 

Started in 1986, the project only began to make real progress in 2003 and gained momentum four years later with the country’s growth acceleration program (PAC). In 2007, the stretch between Açailândia, in Maranhão state, and Porto Nacional in Tocantins, was assumed by VLI.

As of 2019, Rumo started to operate the project’s southern section with an extension of 1,537km. In the last four years, Rumo built three terminals in São Simão, Rio Verde and Iturama, and invested 4bn reais (US$833mn) in terminals, infrastructure works and rolling stock. 

Norte-Sul will allow major commodities-producing states Goiás, Mato Grosso and Minas Gerais to transport the likes of soy, corn and cotton to ports in the southeast and north regions. 

New investments, regulations

The government is now planning to give a boost to the rail sector through increased public investments and regulatory updates.

“Public investments in the rail sector currently total around 400-500mn reais per year and we’re going to build a portfolio of new rail projects,” said Santoro.

According to Santoro, the government is planning to update the authorization regime for rail projects. In place since the end of 2021, it is a legal framework that authorizes private sector firms to build and operate short-line rail networks under rights-of-use issued by the government. Previously, companies interested in such projects had to go through a lengthy tender process that could take years.

For 2024, the government also has a plan to launch a rail PPP in the northeast region. 

"We’re negotiating an early renewal of the rail concession operated by VLI,” Marcus Cavalcanti, the head of federal investment partnerships program (PPI), told BNamericas.

The negotiation will see some stretches that were not built being returned, and lead to a PPP for the stretch between Bahia state capital Salvador and Petrolina in Pernambuco state.

“Our idea is to structure a PPP using the funds that VLI will pay the government as compensation," said Cavalcanti.