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Contract renewal of VLI-operated railroad leads to complaints from states

Jul, 12, 2022 Posted by Gabriel Malheiros

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Discussions around the early contract renewal of the concession of the Centro-Atlântica Railroad (FCA) operated by VLI should grow in strength again. After MRS received the green light for a similar process last month, the renewal of the VLI contract should be next in line. However, it has been the target of intense dispute between states fighting for a slice of the planned billionaire investments. Some are already threatening to take the case to court.

The objective is to extend the contract, which would expire in 2026, for another 30 years. In exchange, the group should invest R$ 13.8 billion in the rail network and pay another R$ 3.3 billion in grants. These funds would be allocated to other works, such as sections 2 and 3 of the West-East Integration Railroad (Fiol). The values were presented in 2020 and should now be revised.

There are uncertainties regarding the process due to its complexity. The Ministry of Infrastructure is currently working to submit the final draft to the Federal Court of Accounts (TCU) by the end of 2022.

The project’s public consultation was carried out in early 2021 and generated many questions, which led to a delay in its conclusion. Now, the authorities are considering opening another public hearing process.

Bahia is one of the states that showed dissatisfaction with where the process is headed. The government is demanding two works: the construction of a bridge between São Felix and Cachoeira and another between Camaçari and Aratu. “These are emergency works,” says Mateus Dias, Planning Superintendent at the Infrastructure Department.

In addition, the government of Bahia asks VLI to repair rail network stretches. The railway plan provides for improvement works worth R$ 650 million by 2025. By 2030, the value would reach R$ 2.8 billion. “We were the state most affected by the current state of FCA in recent years. The railroad network in Bahia was abandoned,” he says.

The state rejected VLI’s plan for the Minas-Bahia route, which called for investments in new locomotives and a maintenance workshop. “In a severe circumstance, taking the matter to court is an option,” he explains.

Another disaffected state is Espírito Santo. The parts of the FCA that span the state are now inoperable, deemed uneconomical and must be renovated.

Ricardo Pessanha, Secretary of Innovation and Development, claims that the government was not heard throughout the proposal’s drafting and contends that the FCA is necessary to support the state’s ongoing port growth. The principal claim is to construct a loop at Serra do Tigre (MG), which would allow the corridor that connects the state to be expanded. The investment is expected to be R$ 3.15 billion.

Espírito Santo demands the ministry reopen negotiations. The state is also considering taking the matter to court, depending on how the process develops. “We need to participate in the discussion. If we understand that our requests are not viable, we will look for another company [to conclude the loop work],” says Pessanha.

Rio de Janeiro is in a similar situation, as the sections of the FCA in the state are also out of operation and may be returned. The Transport Department says it awaits the final report’s release to “define the next actions.”

The State of Minas Gerais will a good part of the proposed investments but still has complaints. The main one is constructing the branch line between Unaí and Pirapora, with an estimated investment of R$ 3 billion. “This region is the great agricultural frontier of the state. So it would make a lot of sense for VLI to be present to capture goods that go through the North-South Railroad,” says Fernando Marcato, Secretary of Infrastructure.

Another demand by Minas is the creation of interconnection between Varginha and Lavras, which VLI has already started. “We also want to see improvements in the Uberaba and Araguari terminals. We are also mapping urban conflicts with the municipalities.”

The pressure coming from the states has been strongly felt. Many criticize the federal government’s plan to reserve part of the funds to subsidize necessary works at Fiol.

When asked to comment, VLI advocated for the importance of completing the early contract renewal, which the company deems the easiest way to attract investments in the medium and short term. Regarding the proposed initiatives, the company said that “VLI based all urban conflict projects from the claims presented during the public hearing process.” “Since the entire process has been conducted with transparency and open dialogue between all parts, VLI does not endorse involving the Courts. All claims are currently under consideration at the ministry and will be properly presented in an additional hearing,” it concludes.

In turn, the NationalLand Transport Agency (ANTT) says that “providing additional avenues for discussing with society is necessary.” The Ministry of Infrastructure says that the public hearing is still open for contributions as the final report has not been published. “The documents are now being revisited, and the ministry, ANTT, and FCA will continue to discuss complementary hearings.”

For Fernando Paes, executive director of the National Association of Railway Transportation (ANTF), the extension of the FCA has a solid symbolic weight. “The process consolidates the public policy of early renewal of railroad concessions, launched in 2015. It is a program that has passed through three governments.”

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/empresas/noticia/2022/07/12/renovacao-da-ferrovia-fca-operada-pela-vli-gera-disputa-entre-estados.ghtml

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