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Rumo may pay extra R$1.5bn for Malha Paulista

Oct, 23, 2023 Posted by Gabriel Malheiros

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Brazil’s Ministry of Transportation and Rumo, a logistics company from the Cosan group, reached an agreement on the additional payment of R$1.5 billion for the early renewal of the Malha Paulista railway concession, according to Transportation Minister Renan Filho. The amount still must be approved by the Federal Court of Accounts (TCU), which has been conducting the dealings.

“We reached an understanding with Rumo and submitted the agreement to the TCU. It will be an important step as soon as the TCU assesses and authorizes the agreement,” the minister said at a public event last week at B3 headquarters in São Paulo.

Since early this year, Rumo has been discussing new terms with the government and TCU for the Malha Paulista contract, which was renewed in advance in 2020. The company struggled to fulfill its obligations within the agreed deadlines, and sources close to the group said the reason was the excessive detailing of the list of works.

Additionally, the ministry seized the renewed discussions to argue that the values the previous federal administration agreed on were very low compared to the benefits obtained by the companies. As Valor reported in August, the situation led to rediscussing the agreements with the possibility of adding new amounts.

Under the original agreement, Rumo committed to carrying out R$6.1 billion in new works and paying a grant of R$2.9 billion in exchange for the early renewal of its contract, which would expire in 2028. It was extended until 2058.

If confirmed, the government should use the additional amount to invest in railways, according to the minister. “We are looking to create a new railway plan, which will need to say what it will do. But, for that, we must have a source of funds,” Minister Renan Filho said.

Officials are still evaluating how to ensure the resources do not enter the general budget. “President Lula wants to earmark for railways what comes from railways. Matching this with legal issues is another issue that needs to be discussed. But there are solutions, like what was done in [other projects in which] cross-investments were made, and there are other solutions.”

According to him, the R$1.5-billion amount negotiated with Rumo would already represent a leap over what the federal government had invested in in recent years. In 2022, he said, the amount was R$300 million. Rumo declined to comment on the matter.

At the event, Minister Renan Filho also said that he intends to hold two more road concession auctions this year. One is already scheduled: BR-381, between Belo Horizonte and Governador Valadares, in Minas Gerais, which should be held on November 24. The project includes R$6 billion in investments and R$4 billion in operating costs over a 30-year contract.

Furthermore, he noted there will be time to auction BR-040 between Belo Horizonte and Juiz de Fora, also in Minas Gerais, in December. “It will be the last auction of the year.” The concession, which has yet to be tendered, provides R$5 billion in investments and R$3.8 billion in operating costs.

According to Minister Renan Filho, officials are “optimistic” about the BR-381 tender. In the last two auctions, the level of competition was considered low by the market. Lot 1 of Paraná state roads attracted two offers, and Lot 2, only one.

“We work to bring more competition to auctions. We are taking steps in this regard, gradually reducing the value of investments and modifying the delivery of envelopes so that there is no control over who delivered or not, as this interferes.”

According to the ministry’s schedule, considered ambitious by the industry, another 10 road auctions are planned in 2024. If concluded, they would represent at least R$50 billion in works. The plan also foresees another 20 tenders between 2025 and 2026.

Source: Valor Econômico

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