A new formula for financing, will mean more railways are to be built in Brazil, to be completed much more quickly than in the past.
During the past few decades, the amount of most of the commodities Brazil has produced and exported, has often increased by double figures in a year. But the amount taken to ports by rail, remains at a well below the world average, and stands at about 35%. Most of the rest goes by road, as water transport has a less than 10% share. The 350–400mt (million tonnes) of iron ore exported each year, form a high proportion of the total.
Over the years, numerous efforts have been made to increase the share carried by rail. Notable amongst these has been the 1,500km North–South line as well as the Transnordestina. But although these new lines have been started with great fanfare and enthusiasm by politicians, they have all taken several times the original estimates to complete, and have cost much more than was originally planned.
Even now, the North–South line, first begun in the 1980s, remains incomplete, work having halted on numerous occasions as funds ran out. But with demand for Brazilian iron ore, soya beans, maize, sugar and market pulp, growing steadily each year, a new formula for financing rail building has finally been found.
Brazil’s railway network was privatized about 35 years ago, when three leading companies won concessions. One was mining company Vale, which now operates three lines, and has shareholdings in others. The second is Rumo, whose leading shareholder is the Cosan sugar and energy company, in a partnership with Shell. The third is MRS. The 30-year concessions awarded to these three companies have all expired in the past couple of years, and they all pressed for them to be extended. It has now been agreed that in return for allowing the concessions to be renewed, the three companies should each undertake to build and manage several major new lines.
So Vale, together with the trading companies whose grains and other commodities will use the line, will be the major shareholder in the planned 933km ‘Ferrograo’ line. This new route will link soya- and maize-growing regions in the states of Mato Grosso and Goias, to the riverside port of Miritituba, from where several million of tonnes of grains are now transferred to barges.
Barges take the grains downriver to ports at Barcarena and Vila do Conde, where they are loaded onto sea-going ships. Barges of grains, which have been loaded at up-river ports of Santarem and Itacoatiara, also now transfer their loads at these ports. Rumo is to become a partner in the partly completed Transnordestina line, which is to run west from the Bahia port of Ilheus, to link with the Norte–Sul, while both companies will have a share in the Centre West ‘Fico’ integration line. The logic behind building these new lines, is that they will enable the soya and maize grown in the ‘Northern Arc’ area to reach regional ports much more cheaply than is now the case. Demand for Brazil’s soya and maize is continuing to grow fast, notably for export to China, while the southern states of Brazil are now unable to produce more grains, so any extra will be grown in the north.
At the moment, almost half all Brazil’s grains are still exported via the ports of Santos and Paranagua, some 2,000km from where they are grown. But with road freights rising sharply in the past few years, plus the fact that northern ports are much nearer the fields where the extra grains are being grown, gives the northern ports a growing advantage.
Two other new projects will involve building roads which will run from northern and central Brazil, through neighbouring Bolivia, Paraguay and Argentina, to the Pacific ports of Antofagasta, in Chile and the Peruvian ports of Ilo and Matarani.
A steadily increasing proportion of virtually all Brazil’s higher value exports, as well as iron ore and grains, are now sold to China, and other countries in Asia. Both of these two routes will be about 2,500km long, and they start from the parts of Brazil where a steadily increasing proportion of high value market pulp, as well as beef, pork and poultry are produced.
Both these new routes also bridge rivers, such as the Paraguay and Madeira, along which bulk cargoes are already shipped by water, either to the Atlantic via the Amazon, or to ports along the River Plate. It is expected that the new routes will allow countries such as Bolivia and Peru, to export either via Brazil’s Amazon river, or along the Paraguay river, which runs through Paraguay and Argentina.
A high proportion of the world’s reserves of lithium, which is used in making batteries for electric cars, are mined in the huge salt flats of Chile, Bolivia and Argentina, and these will also benefit from the new routes. Until the 1980s, two railways linked salt flats with the Chilean port of Antofagasta, one running from Argentine, and other from Bolivia, and both of these lines are likely to be re-opened. As more and grains are produced in the north of Brazil, extra fertilizer, much of which is now imported from Canada, could travel to northern Brazil via the Pacific ports, rather than via the Atlantic.
Most of the fertilizer now imported from Canada arrives at Santos, from where it is taken north as a return cargo by truck. But as less grains travel south, more fertilizer could be imported directly to the ‘Northern Arc’ region, rather than taken by road from Santos. With its 3,000km Atlantic seaboard, it is surprising that such a small proportion of goods moving north and south are now taken by coastal shipping.
Until Brazil’s network of long distance highways was built, a project which began in the 1960s, many of the cities in the North East were supplied exclusively by sea. But in the intervening years, the use of coastal shipping has declined. Until recently, regulations required that goods must be carried along the coast in high-cost Brazilian bottoms, with Brazilian crews only, to used for this trade. Until recently, a surcharge was levied on all incoming freights, to help finance Brazil’s own shipbuilding industry. However, in the past few years, many of these restrictive practices have been dropped, partly because of the growth in the use of the ubiquitous container.
If numerous new ports have been built in the north and north east, Brazil’s leading port for general cargo, Santos, now handles more than 50 million tonnes of goods each year, much of it arriving by rail. Leading cargoes are soya, sugar and market pulp, but a huge variety of general cargo also uses this port. The government has allocated $50 million to improving rail access to Santos, which is the terminus for trains belonging both to the Rumo and MRS companies.
Lines within Santos port are also to be upgraded, as new rail route are extended to the far west of the country, as well as in anticipation of the time when the North-South system is fully operational. The North South line alone is expected to be carrying about 50mt of grains a year in a few years time, most of it to flow through Santos.
Not all the news for Brazil’s logistics is good. About 15 years ago, a prolonged drought caused water levels in reservoirs which feed hydroelectric power stations, to fall to critical levels. This forced electricity rationing, as well as curtailing traffic on the important Tiete-Parana, river system, and river transport there was brought to a halt. This year has seen a repeat of the low rainfall and it likely that transport along the Tiete-Parana system, along which millions of tonnes of soya beans, maize, sugar cane and oil products are moved each year, will have to be suspended again. This will mean the cost of getting much of the grains and sugar to Santos and Paranagua, will rise appreciably in the next few months.
Port of Santos