Brazil is one of the world’s fastest-growing economies. In order to cope with its new scenario, which demands investments in logistics, urban mobility and airport improvements, the country is investing BRL 443 billion until 2016 to improve its transport system, mainly envisaging the deadline of hosting the 2014 World Cup and the 2016 Olympic Games.
After a long time of focusing investments in the road sector while neglecting other modal systems such as ports, airports and railways; the Brazilian government is now giving priority to implementing and upgrading mass transport projects as well as extending private participation through concession in infrastructure operations and investments.
Cargo and passenger railway transport in Brazil is facing a new cycle of investments as the government plans to invest BRL 56 billion in railway construction and improvements over the next 5 years and a further BRL 35 billion by 2028. The richest Brazilian state, São Paulo, will invest BRL 45 million between 2012-2015 for the expansion of its passenger railway systems. Currently, there are 4 expansion projects under construction.
Rio de Janeiro city is currently constructing two new metro lines and improving the commuter railway system. Cities such as Belo Horizonte and Salvador will expand their existing metro networks, while Curitiba and Porto Alegre in the south of Brazil are set to build entirely new ones.
The Federal government is taking forward the project for Brazil’s first high-speed train with an investment of BRL 35.6 billion and an expected completion date in 2020. It will connect the two largest Brazilian cities, São Paulo and Rio de Janeiro, reducing the travel time to just 80 minutes. It is expected to transport 33 million passengers in the first year upon completion.
Brazil has experienced an increase of 153% in passenger air traffic between 2003 and 2011, increasing from 71.2 million per year in 2003 to 180 million per year in 2011. The Brazilian government had to seek new financing sources for the airport sector, opening the market for private operators.
The first privatisation round involved three airports – Guarulhos (São Paulo), Viracopos (São Paulo) and Brasília (capital of Brazil) – where the Federal government (through Infraero) kept a 49% stake in each. The new operators must invest BRL 16.2 billion to improve the operations and facilities.
The Federal government will invest more than BRL 3.5 billion in the airports that remain under its full control that are located in the 12 host cities of the 2014 World Cup. More airports are due for privatisation (Galeão Int’l in Rio and Confins Int’l in Belo Horizonte) in September 2013.
The port sector in Brazil is undergoing wide and dynamic changes, with the government seeking to introduce measures to radically increase privatisation in ports.
This measure is known as MP 595, and will feature an investment programme of US$26billion. The saturation of Brazilian ports is the background to this government investment initiative with the bulk of the investment expected to occur between 2014 and 2017.
The size of the Brazilian road network is proportional to the size of the country, immense. There are more than 60,000 kilometres of paved road which need to be maintained and repaired. It is undisputed that the government alone cannot fulfil these needs and that private sector participation is vital in ensuring sufficient investment.
The government recently announced a new round of road concessions. There are nine lots in the package with the first two being auctioned in September 2013; they are attractive investments for private companies and will no doubt cause a great deal of competition.
The winners of the concession auctions are always those companies that offer the lowest quote and the term generally lasts 30 years.
There are credit conditions attached such as the maximum leveraging of 80%.
Getting into the market
Brazil is a complex market but there are huge opportunities and several foreign companies are successfully operating in the market. Its complexity is minimised by having a local presence either through partnership or its own structure. This also has a positive impact when taking part in public tenders as it is a requirement imposed with the objective of minimising risks.
UK companies in general have a good reputation for offering very good quality and high technology standards.
Trade Exhibitions are a fundamental opportunity for building a business network and getting to know key market players. The main companies use these events to network and investigate other business opportunities. Companies should contact UKTI in order to check the possibility of having an organised visit to Brazil in order to establish business relations. It would be of even greater benefit to organise a trade mission that coincides with a major exhibition as a means of facilitating contact between local businesses.
Public tenders, either national or international, once published, have short deadlines and often require several documents to comply with the needs and requirements of the service or product being contracted or purchased. Visiting the market beforehand and understanding these requirements and market operations before taking part in a bidding process ensures a greater chance of success.
Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).
To commission research or for general advice about the market, get in touch with our specialists in country – or contact your local international trade team.
Sueli Coca, Business Development Manager for Mass Transport, British Consulate São Paulo – Brazil. Tel: +55 11 3094 2731 or email: email@example.com.
UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.
Business on Rail
5th November – 7th November 2013
3rd-7th December 2013
Topics: Transport & Logistics