By Alexandre Mansur*

Brazil depends on trucks. This fact was evident after the truck-drivers’ strike of 2018, when the vulnerability of the transport sector was exposed. The supply of medicines, food and gasoline were compromised in at least 24 states (as well as the Federal District) with the paralysis of the highways. But it is not only this. Our dependence on this type of transport is also related to other problems such as the high risk of road accidents, the emission of greenhouse gases (GHG) and the high cost of the maintenance of the road network.

It is not by chance that road transport is one of the main polluters of the country. As demonstrated by the data from the Institute for Energy and the Environment (IEMA), road traffic was responsible for 48% of the emissions of greenhouse gases in the Brazilian energy matrix in 2017, totaling 209 million tons of CO2 released into the atmosphere. Of these emissions, about 50% are from cargo trucks and the rest from passenger transport.

What are these cargoes that are consuming so much diesel fuel on the roads in Brazil Contrary to what one might imagine, it is not agricultural and mineral bulk, but the so-called general cargo – everyday items such as home appliances, processed foods and beverages, basic products of rubber and plastic, and manufactured products. According to the National Plan of Logistics (PNL) of 2018, the transport of general cargo corresponds to 73% of what is transported on the roads. This amount exceeds the sum of the volume of the bulk agricultural products, such as grains (6%), liquid bulk, such as fuel (5%), and non-agricultural solid bulk, such as mineral ores (16%), added together.

These factors make Brazil an anomaly among countries of continental dimensions. Experts point out that the way to make the system more efficient, reducing the environmental damage and human losses, is to invest more in rail transport, as happens in the United States and the European Union. In Brazil, however, to exploit the rail network better, it is necessary to ensure the free passage of those who need the railways.

One of the major challenges for Brazil is to use railways more efficiently. On the one hand, the country needs more railways. This requires investment. However, at the same time, we also need to use the already existing lines better. Many sections are abandoned or underused. This is a recurring fact in the Brazilian network, as pointed out in a survey produced by the Revista Ferroviária [Railway Magazine], the leading publication of the sector. According to the study, 42% of the network is being appropriately exploited. Most of the network is still underused, of which 31% is abandoned and 27% is semi-abandoned, with over half of the capacity unused.

Also according to the survey by the Revista Ferroviária, the highest rate of idle capacity is in the Western Network, operated by Rumo, which runs from the west of the state of São Paulo to Bolivia, passing through Mato Grosso do Sul. Up to 91% of the railway is without traffic or underused. In other regions, the situation is not much better. In the Northeast, 73.77% of Transnordestina is practically unused. At the Ferrovia Centro Atlântica S/A (which runs in the states of São Paulo, Rio de Janeiro, Goiás, Bahia, Espírito Santo, the Federal District, Sergipe, and Minas Gerais), operated by VLI, the rate is 70.74%. In the Paulista Network, also operated by Rumo, the figure is 62.27%. In the Southern Network (which covers the states of Rio Grande do Sul, Santa Catarina, Paraná and São Paulo), 50.63% of the tracks are underused.

The explanation for this fact is historical. In the 1990s, when there was the first significant privatization of the railways, each section of the national network ended up with a different operator. The format of the contract entered into at the time – and still in force today – does not make it obligatory for the operators to allow third-party trains to run on their railways. This restricts the right of passage of freight and people.

However, this is about to change. There is a bill in the Senate, introduced by Senator José Serra (PSDB-SP), which provides for the use of a same railway section by several companies. This law would end the exclusivity. It foresees the creation of a private entity of railway self-regulation. The text has already been approved by the Economic Affairs Committee (CAE), in December 2018.

The implementation of this law is already the subject of discussion among experts. The National Confederation of Industry (CNI) considers that a viable measure to recover the sector would be the early extension of these concession contracts, so that the operators have to, from the date of their renewal, reserve a portion of the installed capacity of the railway for sharing and invest pre-established amounts ​​in the improvement and expansion of the networks. This would stimulate the industry and the trade of its products, allowing them to

arrive at places that are currently distant.

How can the use of the train line be offered to third parties without the operator, which paid for the right to exploit the section, being harmed? The consultant, Bernardo Figueiredo, an ex-director general of the National Agency of Land Transport (ANTT) has a suggestion. According to him, the guarantee of availability for the circulation of third party trains could be offset by the payment of a fee, as occurs on some highways with privatized sections. “The more trains circulating on the railway, the lower will be the fixed cost attributed to each train. Therefore, the exploitation of the railway will be more profitable and the value of the concession will be greater, without generating any harm to the operator,” said Figueiredo.

Using the method suggested by Figueiredo, the third party trains would remunerate the operator in the same way as the company’s own trains, to the extent that the price for the use adequately reflects the costs of the operator. For Figueiredo, if the railway capacity is not fully utilized by the trains of the operator, it can earn more with the use of third party trains. If the scenario is different, where the capacity is fully used, the operator can expand its lines to meet the demand.

The bill circulating in Brazil was inspired to some extent by the American model, where almost 100% of the railway network is privatized. The United States is the country with the largest railway system in the world, with 200,000 kilometers spread over nine networks. Some of these lines even have connections with neighboring countries, namely Canada and Mexico. Since the sector was delivered to private enterprise in the 1980s, in a proposal of self-regulation, the prices for freight transport are no longer determined by the government and are now established in accordance with market demand. This has made the companies highly competitive and has focused their investments on where they are really important. It is good for the customer and also good for business.

In search of the right formula, in June this year, the minister of Infrastructure, Tarcisio Gomes de Freitas, entered into a memorandum of cooperation with the US Department of Transportation to promote the regulation and investment in the Brazilian railway sector. It is an opportunity to observe the American model and to capitalize on the good lessons that can be learned from it. If it works well there, it could also be an option here.

*With Bruna Alencar

This article was originally published in the website Exame , on December 16, 2019.