Railways – BRL 25 Billion in Investments Expected If Bill Is Approved

The New Legal Framework for Railways May Unlock New Projects and Investments; The Bill Has Been Stuck in the Senate for 3 Years

If approved by the Senate, the new legal framework for railways could result in investments of R$ 25 billion. If approved in the coming months, the bill, which has been stalled since 2018, will proceed to the Chamber of Deputies and may advance various projects, such as the construction of railways by companies interested in connecting new destinations and reducing transport costs.

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The Railway Bill

The text of the bill allows for the construction of railways through an authorization system without competition procedures. Currently, the operation of this model by the company requires a bidding process, resulting in concessions. This format will continue to exist, and the choice of the system will depend on the business model.

Sources from Estadão/Broadcast reported that there are four key areas being discussed among people linked to the railway sector and the government, which may develop if the new railway legal framework is approved by lawmakers.

Since 2018, the bill has been stalled in the Senate and is expected to be approved in the coming months after analysis by the Chamber. In recent years, people have anticipated a new law that would allow the private sector to construct railways of interest, thus stimulating the development of some projects.

Projects That May Develop

The railway that aims to connect the city of Sete Lagoas in Minas Gerais to São Mateus on the coast of Espírito Santo, where Petrocity Ports will operate a port terminal in the state, is one of the projects that could be unlocked with the approval of the railway legal framework. The company hopes to construct a 560-kilometer railway between the two cities, with estimated investments of R$ 6.5 billion. The subsidiary already has a name: Estrada de Ferro Minas-Espírito Santo.

According to José Roberto Barbosa da Silva, CEO of Petrocity, there are high hopes for the potential of the railway. He stated that this route will reduce the time needed to transport different types of goods and address the idleness of industries that cannot safely produce more products due to logistical issues.

Grão Pará Multimodal, which is authorized to operate the port terminal at Alcântara in Maranhão, also plans to build a 515-kilometer railway—the Maranhão Railway—with an investment of R$ 6.2 billion (if the railway legal framework bill is approved). The first segment, extending 215 kilometers, will connect the terminal and the city of Alto Alegre do Pindaré, linking to the Carajás Railway (EFC), operated by Vale. In the second phase, the group plans to construct an additional 300 kilometers to connect to the North-South Railway.

Increase in Existing Railways

If the bill is approved, the new operational model for railways may also facilitate the expansion of routes by companies already operating branches under franchise regimes. An example is approximately 700 kilometers connecting Rondonópolis to Lucas do Rio Verde in Mato Grosso.

At least R$ 8 billion will be needed to construct a railway, which is important for the flow of agricultural production. The branch will connect to the North Network operated by the company Rumo, which, together with the Paulista Network, will form a corridor to the port of Santos on the coast of São Paulo state.

Another project that could result in the expansion of existing railways with the approval of the bill is the Arco Luziânia (GO) – Unaí (MG) – Pirapora (MG), which rural producers in the region have demanded for years to capture the agricultural demand in western Minas Gerais. The investment value is estimated at around R$ 4.9 billion. VLI, the company that operates the Centro-Atlântico Railway, has been identified as a potential investor in this area.