en.Wedoany.com Reported - The Brazilian government plans to auction freight railway concessions, but the project contract structuring is progressing slower than expected, and with the country approaching its election process, the auction is expected to be delayed. The plan was announced late last year, originally aiming to auction at least eight freight railway segment contracts this year, with capital expenditure estimated at approximately 147 billion reais ($30 billion).
Vicente Abate, president of the Brazilian Railway Industry Association (Abifer), told BNamericas that the auctions are expected to proceed and there is investor demand, but there may not be enough time this year to hold eight auctions. It is very likely that some contracts will still be auctioned this year, but most will take place next year. After completing a series of auctions in sectors such as highways and sanitation in recent years, the Brazilian government began structuring concession contracts in the freight railway sector. However, project structuring and notice drafting face greater challenges, as these projects involve licensing-related risks and require complex structural investments, since cash flow can only be generated after all works are fully completed, a process that takes several years.
Despite these challenges, the project portfolio has attracted private interest. Companies have contacted the federal government to obtain information on each planned project. Companies expressing interest include Spanish firms Acciona and Sacyr, Portuguese firm Mota-Engil, Mexican firm Grupo México, and China Railway Engineering Corporation (CREC). Local companies such as Vale, CSN, MRS, and VLI are also showing interest. Currently, most goods transported by rail in Brazil are mineral products, and the government hopes to use new contracts to promote projects that simultaneously serve large agricultural production areas.
Given the complexity of contract structuring, the federal government acknowledges that only five projects can actually be auctioned this year: the Southeast Railway Loop, the Western Network, the Minas-Rio Corridor, the East-West Corridor, and the Ferrogrão railway concession. Even with a new timeline, political factors could cause further delays. Brazil will hold elections for president, governors, federal deputies, and senators in October. The latest polls show a tight race between current left-wing President Luiz Inácio Lula da Silva and right-wing candidate Senator Flávio Bolsonaro. Market participants believe the freight railway concession agenda is a model that both candidates should strengthen in the next four-year cycle, but the election process may delay certain procedures. If the current president is re-elected, infrastructure-related positions may change; if the opposition candidate wins, the new government's first year typically brings profound ministerial changes and revisions to plans formulated by the previous administration.
