Infrastructure Expands in Brazil Despite Crises

• by Mario Osava (rÍo de janeiro)
• Friday, June 04, 2021
• Inter Press Service

Concessions for airports, highways, railways and port terminals, auctioned in the last two years, total 14 billion dollars in investments, the infrastructure minister announced at a press conference with some twenty foreign correspondents, in which other leaders from the areas of trade and transport also took part.

Accelerating this process from July will allow the country to raise the total investment to 200 billion dollars over the next five years, if resources and services under the management of other ministries, such as power plants and sanitation, are included, he projected.

"It is the largest infrastructure concession programme in our history," Freitas said in a Jun. 2 video conference with foreign correspondents.

The COVID-19 pandemic contributed to Brazil's success in drawing international capital, contrary to what might have been expected.

"We forged ahead when many countries pulled back and stopped offering their assets due to the uncertainties of the economic situation,” said Freitas. “We decided to bet on investors’ long-term vision and seek out the excess capital available in the world, as unique sellers."

The operation of 22 airports was privatised on Apr. 7 for a sum equivalent to 17 times the minimum price set, despite the air transport crisis caused by the pandemic. A French company acquired the 30-year concession for a block of seven airports in northern Brazil. The others are now in the hands of a Brazilian consortium.

The success was due to "Brazil’s tradition of respecting contracts," the large portfolio of projects and their excellent profitability, said the minister at the virtual press conference, promoted by IPS in partnership with the Association of Foreign Media Correspondents, the National Confederation of Commerce and the Federation of Chambers of Foreign Trade.

Attracting national and international private capital is the way to cover the infrastructure deficit in Brazil, given the "delicate fiscal situation" that limits public investment, the infrastructure minister said.

"The Ministry of Transport had 20 billion reais (about 7.5 billion dollars at the time) for investments in 2014 when it was only in charge of land transport; today the Ministry of Infrastructure has six billion reais (1.2 billion dollars) and oversees ports, airports, roads and railways," he pointed out, to underscore the need for private capital.

Brazil invested 2.2 percent of its GDP in infrastructure from 2001 to 2014 and "should invest four to five percent to overcome its historical deficiencies," said José Tadros, president of the National Confederation of Commerce.

That is much less than neighbouring countries such as Chile and Peru invest in infrastructure, and the consequence is high costs, "bad roads and ports, and lack of railways and intermodal connections," he lamented.

But "it’s a virtuous moment" in the railway sector, with a strong rise in investments expected after the renewal of existing concessions and the future construction of two new major lines, said Fernando Paes, executive director of the National Railway Transport Agency.

The Ministry of Infrastructure's National Logistics Plan sets a target for railways to carry 36 percent of national freight by 2035, an increase of 70 percent from the current share.

Ferrogrão (part of the plan) is the "most important project in Brazil," according to Freitas. The 933-kilometre route will mainly serve the export of soy and maize from the mid-north of the state of Mato Grosso, the country’s largest producer of these exports, accounting for 27 percent of the total. The northern Amazonian route will be used instead of the more distant southern ports.

Exports are currently transported via the BR-163 highway, the paving of which was only completed in February 2020, after decades of soybean-laden trucks getting stuck in the mud while crossing more than 900 kilometres of Amazon rainforest to reach the port of Miritituba on the Tapajós River, before the soy is carried over 1,100 kilometres down the river to the Atlantic ports.

The railway serves the interests of the multinational corporations that dominate these Brazilian exports and the global agricultural trade, such as the U.S. companies ADM, Bunge Limited and Cargill.

But Ferrogrão will make transporting these exports cheaper and will help reduce freight costs across the country, by expanding the scale of agricultural exports throughout northern Brazil and establishing a logistical hub between the heart of the Amazon and central Brazil, the infrastructure minister hopes.

Products from the Manaus Free Trade Zone, an industrial park in the capital of the state of Amazonas, will reach major national markets via waterways and the railway, he predicted.

He also said its construction will have beneficial environmental effects by cutting greenhouse gas emissions by trucks and curbing the more intense deforestation provoked by roads.

But environmentalists and indigenous rights advocates disagree.

"It will stimulate the expansion of the agricultural frontier in the Amazon rainforest, where there is a lack of governance, which results in deforestation," said Sergio Guimarães, executive secretary of the Infrastructure Working Group, in an interview with IPS by telephone from Brasilia after the press conference.

The environmental assessment does not include the indirect impacts of the project over an area wider than the railway route and its margins, he said. Cheaper, largescale transport tends to expand the area of production in a region already affected by huge monocultures on the edges of the Amazon rainforest.

In addition, more supply and demand studies and comparative analyses of alternatives are needed, the activist said.

Three railway projects have been presented to transport exports of soy and maize from the mid-north of Mato Grosso, which currently stand at 70 million tons per year and will increase to 120 million tons in the near future, according to Freitas.

In addition to Ferrogrão, an isolated line to the north, the Central-West Integration Railway (Fico) will run from the east, connecting to the North-South Railway which is already in operation and has access to ports in the Northeast and Southeast of Brazil.

The third alternative is a proposal by the Rumo company to extend its Northern Network, which now reaches the south of Mato Grosso, to the centre of the soy-producing region. This network has the advantage of connecting to railways with access to Santos, Brazil's main export port, and crossing the state of São Paulo, the most economically productive and populous state.

But "there is not enough freight to make the three railways viable," said Guimarães, who is calling for comparative studies on the Ministry of Infrastructure's Logistics Plan’s other projects and concessions.

Other risks identified by Guimarães regarding the Ferrogrão are the possibility of overloading and accidents on the Tapajós-Amazonas waterway, if most of Mato Grosso's production is exported via this route, and variations in river flows due to climate change.

Another railway, the West-East Integration line (Fiol), which crosses the northeastern state of Bahia and had a 537-kilometre stretch granted to a mining company controlled by Kazakhstan's Eurasian Resources Group, also faces environmental opposition for threatening local biodiversity, especially in the area where a port is to be built.

Ports, which were a "bottleneck" for exports, are also undergoing improvements and extensive privatisation, the minister announced.

And waterways, an undervalued resource in Brazil, are also included in the transformations his ministry intends to make. But this is where the effects of climate change are being felt most even now with a severe drought in midwestern and southeastern Brazil. Navigation on the Tietê river, which crosses the state of São Paulo in southeastern Brazil, is expected to be suspended.

© Inter Press Service (2021) — All Rights ReservedOriginal source: Inter Press Service

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