Wednesday 20 December 2023

Brazil’s ambitious National Railway Plan

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The upcoming launch of Brazil’s groundbreaking National Railway Plan underscores the country’s commitment to transforming its transport system. This strategic endeavour seeks to foster sustainable development and bridge the rail finance gap.

Brazil is embarking on an ambitious effort through its National Railway Plan to use the transformative power of rail transport as a catalyser. Its vision is to increase rail’s modal share from the current 17.7% to 34.6%, although the initiative goes beyond mere numerical targets. It embodies a resolute commitment to sustainable practices and seeks to fortify food security by establishing efficient grain export corridors.

The newly formed Secretariat of Railways in Brazil’s strategy to double rail’s modal share is based on governance via regulatory policies to attract private investment, a repository of high-quality projects, and a strategic financial blueprint. Its actions align with the Paris Agreement’s energy transition goal, taking the four dimensions of sustainable infrastructure into account: social, economic, institutional, and environmental.

For the environmental dimension, amidst the global urgency regarding carbon emissions, Brazil has recognised rail transport’s efficiency and minimal emissions. Railways significantly outperform other modes, in Brazil, it moves 17% of all freight on a tonne-kilometre basis while emitting less than 5% of CO2 emissions.

Evaluated through quantitative studies, the East-West Corridor project is an example of the significance of such a profound shift, as, when delivered, it will emerge as a beacon of sustainability. The World Bank’s studies suggest that over 50 years, this rail corridor could prevent a staggering 65 million tons of CO2 being emitted by avoiding road use, marking a monumental step in reducing emissions and protecting the environment.

Moreover, Brazil is adapting its cost/benefit analysis for rail projects and substantially expanding its rail-focused funding. Bridging the financial gap in railway investments remains one of its most significant challenges. Recognising that private initiatives alone cannot suffice, Brazil will follow the global trend of channelling public investment to stimulate private sector participation, establishing mechanisms like the Viability Gap Fund (VGF). For the first time, specific initiatives have been introduced in the federal budget to allocate funds to rail projects through the VGF, marking a key step in rail infrastructure development.

The timing of these initiatives is particularly favourable for investors, as Brazil has positioned itself as the “world’s supermarket”. The nation’s recent achievement as the first global industrialised food exporter, with 64.7 million tons in 2022, surpassing the United States, underscores the abundant opportunities for investment in railways. These converging factors make it an opportune moment to invest in the country’s rail infrastructure, with assured demand and a conducive environment for those with expertise in the railway sector.

Brazil’s railway commitments are not only about transport but also about mitigating climate change by embracing sustainable principles and bridging the finance gap. Via a combination of public and private resources, the National Railway Plan epitomises Brazil’s unwavering dedication to fostering a greener, more prosperous future.

Source: Leonardo Cezar Ribeiro – National Secretary for Rail Transport in Brazil

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