On-the-Ground Update

Correcting a nine decade failure, railroads are coming over hurdles into the Midwest.

Caio Alves
Published Sep 17, 2020
The first intermodal cargo operation in Brazil was the 'Companhia Imperial de Navegação a Vapor' e 'Estrada de Ferro de Petrópolis', a daring undertaking by Baron of Mauá, the greatest businessman in the Empire age.

From 1854 to 1930 Brazil built 30 thousand km of railways covering the coastal region of the country, with emphasis on the networks of the southern and southeastern regions. During this period, we followed the example of large nations that invested in long-distance railways and waterways, such as Russia, India, Canada, Australia and the United States.

Unfortunately, Brazil took the wrong direction from the Washington Luís Presidency, when the motto became “to govern is to open roads”. Since then, successive governments have started to favor long highways and trucks, to the detriment of multimodal solutions.

In spite of this wrong turn, such strategy started being corrected. In the 1970s, Brazil was the birthplace of the main tropical agricultural revolution on the planet, which combined innovative technologies with entrepreneurship by bold farmers who migrated to the Cerrado of the Midwest states. However, rail transport logistics did not follow the new agriculture age and continued to be mostly coastal and structurally deprecated in the country's long-distance road connections. In recent years the Ministry of Infrastructure, and the deployment of new multimodal options are producing a “silent revolution” in the transport of agricultural cargoes in Brazil.

The main beneficiary of the modal shift is Mato Grosso, the state that leads the national agricultural production - with emphasis on soy, corn, cotton and beef cattle - the regions is further characterized as the area that forms the marginal price of soy in the world. Situated more than 2,000 km from the main ports, Mato Grosso was highly affected by the precariousness of the roads and the high cost of truck logistics, which represents between 15% and 45% of the value of soybeans in the international market. As of now the railroads are "tracking" their ways into the Midwest. Rumo logistics already carries on its trains the equivalent of 1,700 trucks per day on the North Network (volume of Mato Grosso), which takes less than 85 hours to descend to Santos port, the main agricultural outflow channel in the country. Until next year, the company will operate 120 wagon trains. Each train removes 240 interlink semi-trailer trucks from the roads.

After more than 30 years of waiting, the North-South Railway, now operated by Rumo and VLI, will be operational in the second half of 2021, connecting the ports of Itaqui (MA) and Santos (SP).

In parallel, the completion of the BR-163 highway allowed the completion of the bimodal exit through the North Arc, with the grains from the Midwest being sent by truck to the river port of Miritituba, in Pará, and then by barges to the ports near Belém. This departure follows the pioneering nature of the Madeira River waterway, which has been connecting Porto Velho (RO state) for more than 20 years to the Atlantic Ocean. The new multimodal options have already allowed a 15% reduction in freight charges for agricultural cargo in Mato Grosso.

Three projects are currently being proposed:
1) the 650 km extension of Ferronorte between Rondonópolis and Lucas do Rio Verde, which will be built by Rumo to move cargo to the port of Santos; 2) the MidWest Integration Railway, which runs in the west-east direction and may eventually reach the port of Ilhéus.
3) Ferrogrão, which intends to reach the ports of Arco do Norte, complementing the exit via BR-163.

Three railroads taking grain from the Midwest to the north, east and southeast of the country constitute an unimaginable development paradigm for Brazilian agriculture. All of these only depends on auctions or government approvals.
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