Brazil’s North-South Railway auction accused of favoritism

The deadline for submitting offers for the North-South Railway (FNS) concession ended today. According to Valor, at least three parties expressed interests in the auction and submitted documents at the São Paulo Stock Exchange (B3). However, the North-South railway (FNS) project is far from controversy as public and private bodies, including Ferrofrente and the Federal Prosecution Service (MPF), have pointed out instances of flaws and favoritism within the concession contract, including favoritism of the current operators of other parts of the railway.

The Federal Public Prosecution Service (MPF) has recommended the Infrastructure Ministry suspends the auction as the concession contract does not guarantee access throughout the tenure of the project to the stretches north and south of the line to be auctioned, run by VLI Logistics and Rumo respectively. VLI Logistics, whose shareholders include Vale, Brookfield Asset Management and Mitsui, operate the section of railway between Açailândia (MA) and Palmas (TO). Rumo Logistics operates the main section south of the stretch due to be auctioned, running from Estrela D’Oeste to the Port of Santos. The current mandate stipulates only 5-year access to these stretches instead of thirty years. According to the Folha de S.Paulo, the Infrastructure Minister has said it will be possible to extend the 5-year term in the future.

The Ministry of Infrastructure is confident that the auction will take place on Thursday as scheduled, at B3. The minimum bid for the auction is R$1.354bn, but the organizers are hopeful of raising R$2.8bn in investments. The contract will grant a 30-year tenure with no extension possibility. The railway is estimated to have the potential to move 1.7m tons by 2020, and 22.73m tons by 2055.

No próximo dia 28/03 será leiloado o trecho central e sul da Ferrovia Norte-Sul. Este corredor que cortará o Brasil, cria uma nova espinha dorsal na logística de transporte de produção em nosso país, gerando uma série de benefícios econômicos e sociais a todos os brasileiros. pic.twitter.com/h92SsJr3oA

— Jair M. Bolsonaro (@jairbolsonaro) March 24, 2019

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