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August 2, 2019

Brazil's North-South Railroad another Step Closer to Reality

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazil took another step to improving its infrastructure for grain shipments this week when the Brazilian president signed the concessions to operate two new sections of the North-South Railroad in Brazil on a visit to the city of Anapolis, Goias.

The North-South Railroad is being called the "backbone" of Brazil's transportation system. One of the two new sections will be from the city of Porto Nacional in the state of Tocantins south to the city of Estrela D'Oeste in the state of Sao Paulo (855 kilometers). It is expected to start operations by the end of 2019.

The other new section would be from the city of Ouro Verde de Goias in the state of Goias also to the city of Estrela D'Oeste in the state of Sao Paulo (682 kilometers). This section is expected to start operations in 2021. At the city of Estrela D'Oeste, these two sections will connect to an existing rail line that continues on to the Port of Santos, which is Brazil's largest port.

During bidding in March, Rumo S.A. won the concession to operate the two new sections of the railroad. Their winning bid was R$ 2,719 billion, which was 100.9% of the minimum of R$ 1.3 billion required by the government. The concession is for 30 years and it gives them the right to administer two sections of the railroad totaling 1,537 kilometers.

The President was accompanied by the Minister of Infrastructure, the Minister of Agriculture, the Director of the National Land Transportation Agency (ANTT), the Governor of Goias, and local politicians. The Minister of Infrastructure is expecting the amount of cargo and grain transported by rail in Brazil to double in 8 years from 15% of the total cargo in Brazil to 30%.

The Minister of Agriculture feels this could go a long way to greatly improving the grain logistics in Brazil. She estimates that 40% of the producer's costs are the result of storage and transportation. Inside the farm gate, Brazilian farmers are very good at producing grain, it's after the grain leaves the farm when they are at a disadvantage.

The Minister of Infrastructure stated that they are working on other concessions as well. The most important one for Brazilian farmers is the Ferrograo Railroad (Grain Railroad) that will connect the city of Sinop in northern Mato Grosso with the Port of Miritituba in the state of Para. From there the grain would be barged down the Amazon River to other ports. Another concession that they are working on is the West-East Railroad from central Bahia to the Port of Ilheus.

These two rail lines still need to be built and the winning construction bids are expected to be announced in late 2019 or early 2020. It is estimated that the Ferrograo will take 6-7 years to build. Eventually railroads will connect the Amazon River in northern Brazil with the city of Porto Alegre in far southern Brazil.