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January 24, 2019

Brazilian Gov. Proposes Dozens of Privatized Infrastructure Projects

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Bolsonaro administration in Brazil has announced an ambitious plan for privatizing dozens of highways, railroads, and airports in an effort to upgrade the infrastructure of the country and to reduce the high cost of transporting goods and grain across the vast country. Brazil is seeking investors for numerous public-private infrastructure partnerships.

The Infrastructure Minister, Tarcisio Freitas, signaled out railroad projects as being of particular importance for the movement of grain to export facilities. The goal of the government is to double the amount of cargo transported by rail from the current 15% to 31% by the year 2025.

Minister Freitas highlighted two of the proposed railroads, the completion of the North-South railroad in central Brazil and the construction of the Grain Railroad from Mato Grosso to the Amazon River. The North-South railroad currently runs from central Tocantins state to ports on the northern Atlantic Coast. The new project he is promoting is the completion of railroad from Porto National in Tocantins to Estrela d'Oeste in the state of Sao Paulo. At that point, it would connect to an existing railroad that terminates at the Port of Santos, which is Brazil's largest port.

Once completed, the North-South Railroad would be the backbone of Brazil's rail system running north and south through the center of the country connecting northern Brazil with southern Brazil. Two other railroads are being proposed that would connect with the North-South railroad and facilitate the movement of grain from central Brazil to ports on the Atlantic Coast. Bidding on the completion of the North-South Railroad is expected sometime in 2019.

The other major railroad is the Grain Railroad (Ferrograo), which will connect northern Mato Grosso with Port of Miritituba on the Tapajos River, which is a southern tributary of the Amazon River. From that point, the grain would be barged down the Amazon River to ports near the mouth of the river. Bidding on the Grain Railroad is expected sometime in 2019 and it is estimated that it would take 10 years to complete the project.

Farmers and grain companies have long advocated the reduction of the Brazil's dependence on trucks to haul its ever increasing grain production to distant ports. This reduction took on added urgency after the crippling truck driver strike of May 2018 that resulted in significantly higher freight rates for hauling grain.

New railroads can't come soon enough for Brazilian farmers. The few existing railroads do not offer much savings on transportation costs because there is no competition between railroads. The government is hoping that will change when these new projects are completed.