On February 7, 2019, the Brazilian Supreme Court reinstated the National Land Transportation Agency’s (ANTT) authority to issue fines for anyone who does not pay the mandatory minimum freight rate (MFRT), signaling that the true impact of the MFRT has just begun. For U.S. farmers, this added trucking cost will improve their global competitiveness.
For Brazilian farmers, the ruling increases the importance of rail projects that would limit the truck rate impact by lowering transportation cost and providing an alternative transportation mode when road conditions deteriorate. For example, highway BR-163 is the main connection between the grain belt of central Brazil and the Northern Arc of ports on the Amazon River. During early harvest, approximately 1000 grain trucks per day head north on BR-163 to ports on the Amazon River; however, for two weeks in March, BR-163 was closed.
According to the U.S. Department of Agriculture’s (USDA) Brazil Soybean Transportation report, three rail projects stand out as the most important to the soybean export supply chain. The Brazilian government announced infrastructure priorities for President Bolosonaro’s Administration (ANTT and CNT):
- The North-South (EF-151) Railroad: Porto National, Tocantins (TO)-Estela D’Oeste, São Paulo (SP). This railroad integrates four states: TO, Goiás (GO), Minas Gerais (MG), and SP with access to the northeastern port of Itaquí-Sâo Luis, Maranhão (MA). This is a work in progress with more than 90 percent of infrastructure finished.
- Current status: nothing to report.
- The West-East Integration (FIOL) Railroad (EF-334): Ilhéus (BA) to Figueirópolis (TO).
- Current Status: nothing to report.
- Ferrogrão Railroad (EF-170) Railroad: The purpose is to consolidate the new Brazilian export rail corridor of the “Arco Norte” by connecting the grain-producing region of the Midwest to the State of Pará, ending at Miritituba Port. The EF-170 is expected to increase transport capacity and competitiveness within the corridor, alleviating traffic conditions on highway BR-163 by serving as an alternative route for soybean and corn exports. The estimated cost of the project is $3.76 billion (R$ 14 billion) and the concession is for 65 years. Public hearings and technical studies are complete.
- Current status: The Brazilian government plans to announce the tender offer, requesting bids for the concession, during the first quarter of 2019 with the auction to follow during the second quarter.
Unlike the U.S. where railroads fund much of their own track improvements, Brazil railroads are often dependent on public funding. The amount of money that is available for transportation projects will depend on the success of pension reform legislation. For this reason, the odds of the rail projects being completed are impossible to predict.