Carlos de Faro PASSOS Business Consultant, OECD, UNIDO, and Professor FGV-SP. President PLANEF. Worked at IFC / World Bank, was director of Metrô-SP. E-mail: cfpassos@ajato.com.br

BRAZIL: In June 2008 the taxi driver asked me: "Do you think the government will even build the bullet train Rio-Sao Paulo in six years? News reports say that programme to accelerate economic growth (PAC) is delayed and that the Lula government has appointed Minister Dilma as "mother" of the PAC, to speed up the program!"

No wonder the taxi driver was concerned, as the article I published at the time said: International experience shows, the implementation of such projects are not that easy. There are many obstacles to be removed before the deployment of major infrastructure.

England, France and Germany started significant investments in public rail 150 years ago. In 1980 the basic network railways were fully implemented in these countries, facilitating the further construction of rapid and sophisticated railroad developments.

The complexity of the projects required a lot for the deployment of TGVs (high speed trains). Nine years elapsed in France between the decision to open the first line, Paris-Lyon in 1974, and complete start-up in 1983. And this line is even less complex than our Bullet Train that intends to link the seashore of Rio de Janeiro to the plateau of São Paulo. It requires the building of 107 km of bridges and viaducts, 90 km of tunnels and all this along major environmentally protected areas! On the other hand, the efficient São Paulo Metro, founded over 40 years ago, is only 61 km long, with 15 km of viaducts and 33 km of tunnels, carrying 3.3 million passengers a day. The Lula government anticipates that the bullet train will carry only 25.5 million passengers annually by 2014, and to achieve this goal they are prepared to spend more than US $19 billion! (Article continues below)

The foreign investment in railroads in Brazil began in 1854 and continued until the early twentieth century, mainly to cargo export by rail. During the 50’s, the national project development of the Kubitscheck government favored the automotive industry. According to experts, the rail passenger numbers between 1960 and 2008 fell from almost 100 million to 1.3 million a year.

Therefore, what is the solution? The taxi driver asked me. First, I said, to realize that governments cannot do everything without help of private sector. Many Brazilian states and municipalities, and even the federal government, agree with the launch of PPP projects and concessions to invest in energy and roads. But this is too little, given our historical lack of basic sanitation, health, security and poor development of urban mass transportation and intercity rail. The government should also improve technical decisions and regulatory agencies, which will attract domestic and international partners.

In August 2008 I wrote: Investment in similar ventures in other countries, are budgeted through early design and detailed engineering, something so rare in Brazil. These studies identify the railroad, tunnels and viaducts designs, the expropriations, soil quality, civil works, the environmental impact, among other technical requirements. Even then, serious errors can occur, like the Eurotunnel linking France to England, that was estimated to cost US$ 9 billion, ended up costing US$ 19 billion, and whose demand has been much less than it was optimistically expected. The shareholders, French and English, and the creditor banks regret the huge losses stemming from the absorption of the compulsory equity control of the concession company. Today, lenders will only enter a new partnership development with a guaranteed total fixed cost investment (lump sum), assumed by investors or insurance companies. In addition, they anticipate the optimization of projects to reduce costs by shortening - and narrowing - tunnels and bridges, diversion from landfills, and optimization of technical blocks. Thus was obtained cost savings of around 18% in the design TGV Lisbon-Porto.

"Will we have the bullet train for the 2014 World Cup?" Based on information provided by the National Land Transport Agency (ANTT) at a meeting held in Sao Paulo, probably not. How can you calculate with certainty the amount of investment - which jumped from US$8 billion to US$19 billion - if there’s no detailed study of the project? Is the private sector interested in taking the demand risk alone during the concession for 40 years? Will there be sufficient revenues to cover the costs, investments, and bring profits to a long-term Greenfield project unprecedented in the country? Will the Brazilian Development Bank (BNDES) operate the unprofitable TGV, as in the Eurotunnel, to recover 70% of capital invested? Will there be enough time to obtain environmental permits and legal approvals between the selection of tenders bidding in January and signing the contract in June 2010, before the elections as desired by President Lula government? Was the railroad properly designed to integrate the existing local networks of public transport, improve the quality of life of the passengers and reduce traffic congestion and environmental pollution? If so, why place the two most important stations of the bullet train outside the urban transportation networks, namely the Campo de Marte in Sao Paulo and in the Station Maua in Rio de Janeiro? Was there an alternative study to improve the current rail link between Rio and Sao Paulo, simpler and faster deployment, to compete with road transport?

Will the bullet train be a priority project for Brazil, during and after the 2014 World Cup? Many experts doubt, for surely there are several other priority projects in 12 host cities for the Cup, which will require about US$60 billion of investments. Only in the metropolitan region of Sao Paulo there are several important projects for the State and the country: the completion of Ring Road (northern and eastern parts), the expansion of both the existing Metro and local CPTM railroad network, the construction of a third runway at Guarulhos International Airport, the construction of the light rail line (LRL) from Congonhas Airport to subway network, and the express rail link between downtown São Paulo and Guarulhos Airport. Here, there is a good opportunity for the federal government to contribute to reduce the "strangle" in which we live – millions citizens of Sao Paulo City and thousands of Brazilian travelers – circulating in congested roads and poisoned by pollution.

And the taxi driver concluded: "I am convinced that the bullet train will not be ready for the World Cup 2014! Now, I am considering the priorities of the projects cited. How good it would be to live with less congestion, less fuel consumption, less pollution, and spend more time with the family!“

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