Chinese firms plan bid for railway linking Brazil’s grain regions

State-owned companies to form consortium to take part in auction for right to build and operate 1,100km Ferrogrão route

PUBLISHED : Saturday, 28 October, 2017, 5:21pm
UPDATED : Saturday, 28 October, 2017, 5:21pm

A group of state-owned Chinese firms plan to form a consortium to bid in an auction for the right to build and operate a railway known as Ferrogrão, Brazil’s secretary for the government’s public-private partnerships programme, Adalberto Vasconcelos, said on Friday.

With 1,100km, Ferrogrão will connect grain-producing regions in Brazil’s centre-west to the port of Miritituba, in the northern Pará state. The railway is expected to be an alternative to BR-163 road, currently the only way to take grains from central Brazil to northern ports.

The project is estimated to demand 12.6 billion reais (US$3.89 billion) in investments.

What’s pushing Chinese high-speed train projects off the rails overseas?

Vasconcelos said he was recently in China and was told about the intention from certain Chinese companies to form a consortium to take part in the auction, scheduled for the first half of 2018. He did not name the prospective bidders.

“The Chinese are very interested in Ferrogrão,” he said, referring to state-owned enterprises in sectors such as cement and steel.

In May, Brazilian and Chinese officials launched a joint Brazil-China investment promotion fund to increase productive capacity.

The fund has an initial sum of US$20 billion to finance investment projects in Brazil that are of interest to both countries.

In June, Jorge Arbache, foreign affairs secretary of Brazil’s planning ministry, said the fund was ready to receive investment pitches.

Challenges ahead for China’s high-speed rail plans

The fund’s resources will primarily be allocated towards infrastructure, but will also accept financing requests related to manufacturing, agriculture and technology, the secretary said.

He said the fund’s investment decisions will be made by a committee composed of Brazilian and Chinese officials, taking into account both countries’ priorities.

The fund agreed on last year is expected to help finance the construction of railways. This will link Brazilian soy- and corn-producing areas to ports, potentially boosting Brazil’s economy as it slowly emerges from a deep recession.

China also stands to gain because it is a large buyer of Brazilian grains.