The Brazil Cost Comes Mainly from Excessive Use of Highways

    More than thinking about development of railways in Brazil, the government and private initiative must include railway integration in South America in their projects. With integration, trade between the countries in the region could gain strength and regional products would become more competitive on the foreign market.

    This is the opinion of Manoel de Andrade da Silva Reis, logistics professor at Getúlio Vargas Foundation (FGV), the most renowned business administration college in Brazil.

    "South America needs further integration and this must be considered when building a railway," he said.

    For this reason, Reis defended the use of Public-Private Partnerships (PPPs) and greater dialogue about the matter between the South American nations and lamented the fact that companies do not push the government more in the direction of regional projects.

    According to the professor, there are already corridors that permit, for example, trips from São Paulo to Chile by train, but investment is necessary to overcome bottlenecks like different gauges, lack of conservation and the crossing of the Andes. What is still lacking is initiatives. Read below the main stretches of the interview.

    What is there in the planning of railways in Brazil?

    We must grow from about 28,000 kilometers to 35,000 kilometers of railway grid. These are the projects for growth, like the expansion of the North-South Railway and Ferronorte. The central part of Brazil has a lack of railways and these two lines represent country integration in railway terms. Although the country has a small railway grid, with these works most of the country territory, except for the Amazon, would be covered.

    How about South America?

    There is an initiative for Integration of the South American Regional Infrastructure (IIRSA), an agreement between governments established in 2000 to promote the development of transport infrastructure, energy and telecommunications and reach physical integration in the region.

    It is well known that South America is highly un-integrated in the point of view of land transport and there are two complex barriers: the Andes and the Amazon. But these are not reasons for lack of integration. The Europeans did an exceptional job of integration by waterway, railway and highway.

    Little is said about this, but there is investment being made in a great number of projects. A total of 355 projects have been created, being 31 priority. The agenda is for 2005 to 2010, and the investment to be made should total US$ 4.3 billion. Priority projects will receive investment of around US$ 2.5 billion.

    But what is effectively being implemented?

    Some highway projects. There are connections between Brazil and Bolivia and between Brazil and Peru. On our side it is ready and on their side it is in progress. We must find conditions where they are possible.

    There is an idea, the central bi-oceanic corridor, in which there is a possibility of leaving São Paulo and arriving in Chile by railway. The possibility is already true, but it is necessary to improve certain things. One of the problems is the gauge change.

    On the frontier with Argentina, in Uruguaiana, there is a gauge change, so there is a problem of transhipment. There is one solution that has already been adopted by ALL, highway-trains, which are trailers that become railcars. The benefits are that they may be used in highways and in railways and eliminate the need for transhipment.

    Do you see any need for greater railway integration on the continent?

    The answer is yes. But analysis of the transport matrix is necessary. If you look at other large countries you will see that railways have very strong participation, at least 40%. Brazil has a deficiency of railway participation and an excess of highway participation. This does not mean that we have many highways, on the contrary.

    Highways answer to 60% of our transport matrix, and that is a deformity because we transport things that should not be transported by road on them: commodities, large volumes over long distances. This means that the "Brazilian cost" comes mainly from this problem and the same is more or less true for the whole of South America. South America needs further integration and this must be considered when building a railway.

    So when somebody thinks of a project they should already think of integration?

    Yes. It is obvious that projects like the North-South and Ferronorte have an integration character also, but typically of national territory, which also isn’t integrated yet. But it is important to think of continental integration.

    It is important to integrate Brazil and the other countries because for Brazil it is essential to reach the Pacific in an efficient manner, with low-cost logistics, for us to be competitive towards Asia. For the Andean countries it is important to reach the Atlantic in an efficient manner to have more competitiveness in Europe, in Africa, in the American west coast, etc.

    One or two integrations, one more to the south and another further up north, are fundamental for the extra South America international trade and also for trade between the countries, to strengthen the bloc. This is fundamental for the group to become more coherent and strong in negotiations.

    And the bi-oceanic corridor which you mentioned, is it used?

    No. And it isn’t possible because the railways that exist in some of the stretches are still extremely inefficient. The connection exists, but there are serious problems especially in the passage by the Andes. It is possible to reach Chile from here by railway, but some stretches are in terrible conditions.

    There is another option which is to take the Novoeste Railway up to Corumbá (on the border of Brazilian midwestern state of Mato Grosso do Sul and Bolivia), from there up to Santa Cruz de la Sierra, in Bolivia, which is already possible. From there go down the border between Bolivia and Argentina, but it is necessary to build stretches, to then reach Antofagasta, in Chile, and then there is a railway up to Santiago.

    There is also a possibility of making a connection from Santa Cruz to Sucre, in Bolivia as well, which would result in a shorter way to Antofagasta, without having to pass by Argentina.

    These are two corridors that could already be used?

    There could be investments to use them.

    When Brasil Ferrovias and Novoeste were put on sale there were more bids for Novoeste and the majority from foreigners. Maybe the companies are already thinking of this link?

    Surely. I think there is an interest in making greater integration. Taking Novoeste, which goes up to Corumbá and at the most reaches Santa Cruz de la Sierra, only makes sense in the moment of integration.

    Do you see any serious work in favour of railway integration?

    No. We only see the IIRSA, as an entity that is worried about the matter, but the information is scarce. We also see ideas, but I don’t know of any initiative apart from the government saying we need to reach the Pacific. This I mean from the railway point of view. From the highway point of view there are already some things underway.

    The government has problems in obtaining resources, is there any kind of pressure from the business sector for the integration to take place?

    The government not being able to invest is not a Brazilian problem. For example, the United States has a violent problem in this sense. The PPPs aren’t a Brazilian invention, they were created in England because the English understood that the private sector carries out operational things better than the government.

    In the United States, the PPPs are being used in large scale at the moment, in highways, tunnels, because the states lost investing power. In Brazil the answer are the PPPs. Sadly the federal government to this moment hasn’t managed to set up any.

    The state governments are making many, São Paulo already has one for the subway. I believe the private investment will be the solution for the infrastructure, but that the government should do its part too. In that which isn’t profitable the governments have adopted solutions of the type: you do it and I’ll pay for it, but diluted over time.

    And the integration, could it be done by a PPP?

    It is perfectly possible.

    But who has to take the initiative?

    On the first level it has to be from the governments, because it is them who concede the right to a company to build and operate a railroad. There has to be a very good understanding with the bordering governments, and Brazil is on the border with almost everybody. One of the aims of the IIRSA is to create this dialogue capacity, create means for the integration to happen in a more efficient way. The IDB (Inter-American Development Bank) is willing to finance the projects in the IIRSA.

    Shouldn’t the companies do more to pressure the governments?

    Yes, initiative is lacking. In spite of the great companies we have, I believe there is certain inertia.

    Has Brazil been making adequate planning to use the correct transport methods in the correct place?

    There is a lot of thought, a lot of talk on it, there are some interesting projects. But if you want to know if Brazil plans anything in an integrated manner, the answer is no. This is one of our great problems. There is neither continuity nor planning. But I think it is perfectly possible, but the example has to be set from above.

    Anba – www.anba.com.br

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    • Show Comments (2)

    • Guest

      SFergus6423@aol.com
      I tool a bus from SP to Rio and the ride was good until I got to one area before going to Rio. If the driver had made one mistake the bus could go over the edge of the mountain and the passengers would not stand a chance. Why didn’t they cut a hole through the mountains to avoid this dongerous situation?

    • Guest

      Excellent analysis !
      Nonetheless with a few missing points :
      – the existing 28000 kms have not been maintained properly either. Some new money is being invested but is it really enough or not ?

      – It is doubtful that Brazil with its huge size needs only an additional 7000 kms of railways. Even when and if they will have their 35000 kms of operational railways, this looks tiny compared to the size of other populated and large countries.

      – Most of the new projects have an export oriented goal.
      No problem with that, but your overall exports are only 40 % or so of your overall production. Therefore reducing the transportation costs for locally consumed goods are even more important than the goods exported. It benefits 100 % of the society to either buy things cheaper or to make profits for the producers so they can reinvest far more and pay some additional taxes to the government who can himself spread it ovewr the whole society for social inclusion, opther developments projects….etc etc…..

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