Brazil weighs two-year extension of FCA rail concession to avert service disruption

The Brazilian federal government is considering extending the Ferrovia Centro-Atlântica (FCA) rail concession by up to two years to avoid a potential service disruption, as the current contract is set to expire in August this year.

The extension would serve as a temporary measure to prevent a contractual gap and ensure continuity of rail operations while negotiations over the early renewal of the concession with VLI, the current operator, are still under way.

According to information reported by Folha de S.Paulo, the option is being examined by the National Land Transport Agency (ANTT) due to the proximity of the contract’s expiration and the need to prevent an interruption in service.

The original FCA concession agreement was signed on Aug. 28, 1996, with a 30-year term ending in August 2026. The remaining seven months are considered critical by technical staff at the regulator.

In practice, the discussion centers on a regulatory bridge. Instead of relying solely on the early renewal process — which still requires internal approvals at the Transport Ministry and the ANTT before being sent to the Federal Audit Court (TCU) — the government could sign a temporary addendum extending the current concession for up to 24 months.

Brazilian legislation enacted in 2017, which established rules for renewing or re-tendering concessions, allows for such an arrangement when there is insufficient time to complete a new process and a risk of service discontinuity. The mechanism is designed to prevent rail networks from operating without an authorized operator or clear transition rules.

Within the Transport Ministry, however, the timeline to renew the concession by August remains formally in place. The expectation is that ANTT’s board will approve the final renewal report in February, incorporating feedback from public hearings. The next step would be to submit the concession plan to the ministry.

Later in February 2026, the ministry would review and approve the plan before forwarding it to the TCU. Internal government estimates suggest the court’s review could run through July, leaving the final step — signing the renewal addendum — for August, the same month the current contract expires.

There is no fixed deadline for the TCU to conclude its analysis, which is a mandatory step for the process to advance, making the government dependent on external timelines.

At stake is the future of Brazil’s largest rail concession, spanning more than 7,000 km and linking the states of Minas Gerais, São Paulo, Rio de Janeiro, Espírito Santo, Goiás, Bahia and Sergipe, as well as the Federal District. The network connects with other rail concessions operating across the country.

As of August last year, the agreement negotiated between the government and VLI provided for the full renewal of 4,138 km of track, alongside a series of large-scale infrastructure projects. Another 3,082 km that had been abandoned by the company would be returned to the federal government to be offered to potential new operators.

The deal, which includes financial settlements, compensation payments and fines, followed lengthy negotiations between the Transport Ministry and the concessionaire. The package foresees mandatory investments totaling R$28 billion by the company.

Under the plan, the government would grant VLI a new 30-year contract. VLI is controlled by Vale, Brookfield, Mitsui, BNDESPar and investment funds.

Proposed projects include the São Félix rail bypass in Bahia, estimated at R$1.4 billion, a rail crossing in Licínio de Almeida, also in Bahia, budgeted at R$1.6 billion, and the installation of mixed-gauge track between Tocandira and Brumado, with investments of R$6.2 billion. This infrastructure would enable integration between the FCA network and the West–East Integration Railway (Fiol), which runs across the state of Bahia.

In Minas Gerais, the proposal includes the Belo Horizonte rail bypass, still at the design stage. The plan also предусматривает additional investment triggers on the Bahia–Minas corridor that could add up to R$9.2 billion over the life of the concession.

From a strictly financial perspective, the government assesses that renewal is more advantageous than launching a new tender. In a re-bidding scenario, the concession fee payable to the federal government was estimated at R$1.94 billion. Under the renewal model, the direct payment would be R$1 billion, but by bundling loss-making and viable stretches, the projected net present value would reach a positive R$5.3 billion, according to government estimates.

Source: Folha de S. Paulo

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