Brazil revives US$5bn Ferrogrão railway project amid regulatory progress

Brazilian authorities are expected to resume the evaluation of the concession process for the freight railway Ferrogrão (EF-170), a project with an estimated capex of at least 25 billion reais (US$5bn).

This week, responding to a request from the federal government, via the transportation ministry, the country's audit court (TCU) authorized the continuation of the analysis of the concession process for Ferrogrão.

This analysis had been suspended since the beginning of the year, after the Federal Prosecution Service requested the halt, claiming that the project lacked free, prior and informed consultation (FPIC) with the Indigenous peoples affected by the undertaking.

Ferrogrão is an almost 1,000-kilometer project that connects the region of intense agricultural production of Sinop, in Mato Grosso, to the port of Miritituba, in Itaituba, in the state of Pará.

The project passes through regions close to conservation areas and also through Indigenous villages and, because of this, is considered a development with high environmental and social risks.

On the other hand, supporters of the project argue that the railway would not generate additional impacts on the region and would improve logistics, since part of the BR-319 highway, which is in very poor condition, already cuts through these areas.

“In practice, we have Ferrogrão running along a route similar to BR-163, so the environmental impact of this project tends to be positive rather than negative, as you can reduce the need to use trucks and, at the same time, help lower logistics costs, since this highway, which is highly deteriorated, entails high maintenance costs for the transport companies that operate there,” said Vicente Abate, president of the Brazilian Railway Industry Association (Abifer), to BNamericas.

The most up-to-date capex forecast for the project is 25.20bn reais and opex of 49.25bn reais, for a concession contract that could reach almost 70 years. However, these estimates tend to be revised as the government manages to advance the concession contract discussions with the TCU.

The concession of Ferrogrão is part of an ambitious agenda by the Brazilian government, which plans over the course of this year to offer a total of eight freight railway concession contracts.

According to the federal government’s schedule, in the case of Ferrogrão, the original expectation would be to publish the notice in July this year and hold the auction in September.

However, specialists see difficulties in carrying out all these auctions planned throughout this year in the segment.

"The projects are complex and require public hearings and detailed structuring. But I believe that a good part of them can move forward to auction in the second half of the year," said Abate.

The Brazilian government has sought to move forward with freight railway concessions in an attempt to reduce the country’s heavy dependence on road transport.

(The original version of this content was written in Portuguese)