Trains are on track to give exports a boost
SIGNAL FOR GROWTH RISING AGRICULTURAL PRODUCTION IS DRIVING EXPANSION OF THE RAIL NETWORK TO GET THE GOODS TO MARKET. BRASIL FERROVIAS IS MEETING THE INCREASED DEMAND FOR COST-EFFECTIVE TRANSPORTATION

NELSON DE SAMPAIO BASTOS President of Brasil Ferrovias

RAILROADS play a vital role in Brazil’s economy, transporting goods to ports for export and linking several of the country’s main cities.
Last year, Brazilian railroad concessionaire Brasil Ferrovias transported 3.3 million tons of goods. This year, it was around 5.3 million tons and Nelson de Sampaio Bastos, the company’s President, estimates this will rise to 7.1 million tons next year.

Much of the growth is being driven by increased agricultural production, particularly in soybeans, which are exported all over the world. Most of the beans are used for animal feed and Mr. Bastos believes this market will continue to increase as the demand for “real food” for livestock increases.
Brasil Ferrovias, which has 2,800 miles of track, has helped to make Santos, in the state of São Paulo, Latin America’s largest port, accounting for almost a third of Brazil’s foreign trade. Traffic at Santos has been running at record levels—last August, 5.5 million tons of goods were loaded and unloaded there. Over the first nine months of 2002, soybean exports from the port rose 11 percent to 4.5 million tons.

Brazil is now the second-largest producer and exporter of soybeans after the United States. Four years ago only four percent of goods were transported by railroad. That amount has now risen to more than a fifth of all goods.
Mr. Bastos says the only cost-effective way of transporting millions of tons of produce is by rail. The railroad uses about a third of the fuel of trucks, per ton transported.

HIGH FLYER Brasil Ferrovias transported around 5.3 million tons of goods along its 2,800 miles of track in 2002, compared to 3.3 million tons last year

“We are carrying about 87 percent of the goods to the port of Santos,” he says. “We are serving this huge territory of the central-west and we are the only connection to that area.”
In January, Brasil Ferrovias starts work at Santos on the construction of what will become the country’s largest terminal. The terminal—to be built at an estimated cost of $54 million—will enable Brasil Ferrovias to increase traffic to the port from Brazil’s central-west region.
“Demand pressure is growing beyond our original plan because Brazil is becoming more and more competitive in agricultural grains,” says Mr. Bastos.

When construction is completed, the terminal—dubbed TGG—will have the capacity to increase shipments of grains and soybeans from the interior to Santos from the current 2.5 million tons a year to 10 million tons. Partners in the terminal project include agricultural companies Bunge and Maggi.
A proposed rail line will link Cuiabá, the capital of Mato Grosso state, sometimes referred to as “the geographical center of South America”, to Porto Velho, a port town on a major tributary of the Amazon river in the state of Rondônia. This would open up an even greater area of land, which could be used for grain and soybean cultivation.
Mato Grosso is now the largest producer of soybeans in Brazil. “But we are going to become the largest producer in the world, there is no doubt about that,” says Mr. Bastos. “Already, for the first time, Mercosur is a bigger producer than the United States, which originally cultivated soybeans.

“The capacity for expansion is enormous. Only about 25 percent to 30 percent of the central-west region is being exploited. In that region of Brazil alone we could triple agricultural production.”
Brasil Ferrovias also serves companies like Rio Tinto Zinc, which has mining operations in Mato Grosso do Sul. Growth in mining as well as agriculture means the railroad company is also carrying more fuel for these sectors.
“The only really practical solution is alcohol fuel,” says Mr. Bastos. “So we are now delivering diesel fuel into the interior, and transporting out alcohol.”

Brazil is not only one of the biggest sugar producers in the world, it is also the most cost-effective producer. Brasil Ferrovias transports alcohol for fuel to a refinery close to São Paulo. This year, the company transported about 100,000 tons of alcohol fuel and Mr. Bastos says this could grow to three million tons within three years.
“In the next two to four years we intend to make an initial public offering (IPO), and we are seriously considering a share offer in New York,” he adds. “But even before that, we are totally open to new investors.”