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May 28, 2020

Rumo Signs Contract to Operate Brazil's Malha Paulista Railroad

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

The Brazilian Minister of Infrastructure, Tarcisio Gomes de Freitas, indicated yesterday that the National Land Transportation Agency (ANTT) signed a contract with the railroad company Rumo for a 30 year extension to operate the Malha Paulista railroad within the state of Sao Paulo. Their current concession was set to expire in 2028.

This is the result of four years of negotiations between Rumo, the federal government, the state government, and various controlling entities.

Rumo will invest R$ 6 billion on track improvements, locomotives, and rail cars during the first five years of the contract. The existing capacity of the railroad is 35 million tons of cargo per year, but when the renovations are complete, the capacity will increase to 75 million tons per year.

The Malha Paulista railroad is very important for farmers in Mato Grosso because it connects the only existing railroad in Mato Grosso, the Ferronorte Railroad, with the Port of Santos, which is Brazil's largest port.

The Ferronorte Railroad only extends about two hundred kilometers into the southeast corner of Mato Grosso, but Rumo is already in the process of expanding the railroad to the state capital of Cuiaba and then northward into the agricultural heart of Mato Grosso. Mato Grosso is Brazil's largest producer of soybeans, corn, cotton, and cattle.

Rumo is also currently constructing the southern end of the North-South railroad which will connect with the Malha Paulista. As the name implies, the North-South railroad will extend from far northern Brazil to southern Brazil and it is expected to be the "backbone" of Brazil's railroads.

When all the construction is completed, Rumo will be the major railroad available to transport grain and other products from central Brazil to the Port of Santos. Rumo already transports the majority of Brazil's sugar exports as well.

The Minister of Infrastructure indicated that this is yet another example of large amounts of investments being directed toward improving Brazil's inefficient transportation system, especially railroads.

This comes on the heels of an announcement last week that bidding on the Ferrograo Railroad (Grain Railroad) connecting northern Mato Grosso with ports on the Amazon River will be conducted during the first half of 2021. Eventually, when all the construction is complete, grain produced in Mato Grosso will be transported by rail both north and south to export facilities.