April 28, 2015

World Cup rail projects caught offside

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Despite the promises made in the run up to the 2014 World Cup, many passenger rail projects intended for the tournament struggled to get off the drawing board, with schemes cancelled or delayed due to political infighting and problems with securing funds. Kevin Smith assesses the current situation. 

SLOWLY snaking through the rainforest and clinging to mountain cliffs, Serra Verde Express' Trem da Serra do Mar Paranaense, which runs for 69km daily between Curitiba and Morretes in Paraná state is one of the most spectacular tourist railway journeys in Brazil, if not the world.

The metre-gauge railway was built from 1880-1885 to aid the social and economic development of the state's coastal towns by providing a direct connection to the capital. It is still used by Latin American Logistics (ALL) freight services to and from the port at Paranagua, 41km beyond Morretes, and is a true engineering marvel of its time. It features 14 tunnels, and 30 bridges and viaducts, from which passengers have stunning views of valleys and vistas, waterfalls, and lakes.

Passengers on the journey are greeted by hikers and residents of the various small towns and villages along the route who stop to wave at the train as it crawls pass. That they do this reflects the novelty of the passenger train in Brazil in general, and in Paraná where the tourist train is the sole passenger service in the state.

Brazil worldcupFor long distance travel Brazilians rely on buses and planes to traverse the huge distances between cities in this continent-sized country. Its once bustling inter-city network is now a distant memory apart from a few isolated services. Indeed while the larger cities like Rio de Janeiro and São Paulo now collectively carry 10 million passengers a day on rapid transit and suburban trains, rail services in rural areas are reserved for tourist services operated by companies like Serra Verde Express. It's a similar story in the vast majority of medium-sized cities where for decades transport policies have favoured road leaving the streets to drown in congestion, with the few rail services often unable to meet demand.

Curitiba is lucky. Its impressive bus rapid transit (BRT) network, which pioneered BRT when it was introduced in the 1970s, features dedicated corridors served by triple-articulated vehicles that reach all corners of the city and provide a comprehensive downtown service for its 1.7 million inhabitants. Observers credit Curitiba's success to following through with a dedicated plan for its public transport system in spite of changes in government, which elsewhere have delayed or put paid to various schemes.

This year's FIFA World Cup, which Brazil hosted in June and July, was supposed to be an opportunity for many passenger rail projects in the 12 host cities to finally get off the drawing board. The Brazilian government and people envisaged urban transit as a major legacy of the tournament, justifying the vast outlay on the festival of football, with $US 8.5bn earmarked for infrastructure and $US 3.5 for stadiums.

However, as the protests that marred the first few days of the tournament and 2013's warm up competition, the Confederations Cup, showed, a great proportion of the population were aghast that many of these projects failed to materialise.

Instead of vital health and education services and the new infrastructure so badly needed in Brazil, taxpayers' money was prioritised for vast new football stadia, many of which are unsuitable for the local teams they now serve. And as time ran out, money was taken away from many of the promised infrastructure investments.

A bus fare hike in mid 2013 was the final straw. Thousands of people subsequently took to the streets to display their anger, often clashing with police as their frustration boiled over.

A fifth of the projects earmarked for the tournament were dropped altogether, with a study by Globo Network's G1 online portal finding that only 51.7% of the urban transit and airport projects were completed. Of the 45 projects inaugurated, 15 were partially incomplete, and 10 opened during the tournament while 32 were expected to be completed after its conclusion.

The flagship 511km Rio to São Paulo high-speed project is the most glaring example of a rail project that was promised for the World Cup, but failed to arrive. It was actually put out to tender in 2010. But with only one group, TAV Brazil, a consortium of 22 companies led by Hyundai Rotem, submitting a bid, the government was forced to repackage and relet the project into separate operations and equipment, and civil works contracts. Again no appropriate contractor emerged, leading the government to delay the tendering process in August 2013, pushing any hope of the project getting up and running back to at least the 2020s.

According to Brazil's transport minister Mr Paulo Passos, the government's Enterprise Planning and Logistics (EPL) agency is currently reviewing the original studies for the line to see whether they are still feasible, but he failed to confirm a completion date for this study. Brazil's National Transport Agency (ANTT) director Mr Carlos Fernando do Nascimento also told IRJ that there is no date for the conclusion of the study but he is optimistic that the project would eventually get built."It doesn't matter who is in government, we need good infrastructure in Brazil and this project would provide that," Nascimento says.

In addition to the high-speed project, many of the other rail projects promised for the World Cup, and deemed priorities by the government, failed to get up and running in time and were replaced by cheaper and faster-to-implement bus schemes. This was the case in Manaus where proposals to build a monorail project are now seemingly dead, and in Brasilia where a new Reais 276.9m 6.5km light rail line connecting JK International Airport with the city's existing metro network at Asa Sul was cancelled in 2011 amid allegations of fraud in the bidding process.

In other cities transit projects intended for the World Cup that were not completed in time are now resuming. This includes in Cuiaba where only a 500m section of its 22.2km light rail line from the city's political administrative centre to Marechal Rondon International Airport and Coxipó was completed by June. CAF has now completed delivery of a fleet of 40 Urbos LRVs and construction of the Reais 1.4bn project, the most expensive of the transit schemes proposed for the tournament, is due to be completed in December 2015. On November 18 the Federal Public Ministry and State Public prosecutor filed a lawsuit asking the contractors to pay Reais 148m in compensation for initiating the work despite knowing that it would not be finished in time for the World Cup and the subsequent hardship this caused to the population, with over 800 homes relocated to make way for the light rail network.

Similarly in Fortaleza, construction on its inaugural diesel light rail project, the 12.7km link from Parangaba to Mucuripe, was suspended in June, with around 50% of the Reais 265.5m scheme complete. A tender for a contract to complete the work is set to be issued on December 10 according to the state government of Ceará. No date has yet been set for the start of operations.

Belo Horizonte was another city that was not ready in time for the World Cup. However, funding was finally allocated in January for metro improvements and for construction of the new 10.2km Line 2 and an initial 4.5km section of Line 3.

São Paulo also missed World Cup deadlines for the introduction of its inaugural lines 15 and 17 monorail projects and, despite a high-profile accident in which one worker was killed, these projects are now nearing completion. Testing of the initial 3km section of Line 15 is now underway and the complete 27km line is expected to open in 2015. Line 17 from Jabaquara on metro Line 1 and Congonhas airport to São Paulo Morumbi on Line 4 is expected to be completed in 2016-17, while a 25-year public-private partnership (PPP) concession to build operate and maintain the Reais 2.4bn monorail Line 18, was awarded to ABC Integrado consortium in August. The 15km line will link São Paulo with the neighbouring ABC Region (Santo André, São Bernardo, and São Caetano) and is due to be completed in 2018. In addition Move São Paulo secured a Reais 9.6bn concession for a 25-year PPP concession for metro Line 6 in November 2013. The 13.5km north-south line will link Brazilândia with São Joaquim on Line 1 and operations are set to begin in 2020.

Meanwhile construction of CPTM's 11km airport service from Engineer Goulart to Guarulhos International Airport is also underway and expected to be completed next year. A scheme to reintroduce regional passenger services on four routes from the city is also set to commence in the first quarter of 2015 with a call for private companies to express interest in a PPP concession for the São Paulo - Americana project. Calls for three other projects for a total of 477km are set to follow during the year. In addition CPTM completed a feasibility study for a 30km north-south light rail line from Guarulhos to the ABC Region in September, while a 16.9km light rail line between the neighbouring cities of Santos and São Vicente is expected to open in March.

Work is also continuing in Rio where public transport investment and improvements are a major element of the works taking place ahead of the 2016 Olympic Games. This includes the introduction of an enhanced commuter service and a 15km extension of Line 4 from Ipanema to Jardim Oceânico with a branch to Gávea. A 4km extension of metro Line 2 from Carioca to São Cristóvão via Estácio is also due to open in 2018, while work is also underway to develop a 52km six-line downtown light rail network.

Funding sources

Completing such a wide range of infrastructure projects at the same time with such a strict deadline is certainly a cause of the delays. Whether Brazil has the engineering and project management expertise to complete such an array of projects simultaneously has also been questioned, while political posturing is cited as another contributing factor, with alleged government corruption regularly condemned by protestors. Overcoming the mountains of red tape to get these projects up and running is another significant challenge, as is securing sufficient and adequate sources of funding.

Brazil's government intends to enact many of the country's urban rail transit schemes as PPPs to ease the cost burden on the federal and state governments, many of which are at their credit limit and simply cannot borrow any more money.

However, this makes delivering socially important but low farebox-generating transit projects much more problematic. After all it is impossible to attract an investor unless they have sufficient guarantees that the service will operate at a profit; a metro project in São Paulo with connections to the existing network which carries 5 million people a day is more attractive than a standalone monorail project in Manaus.

Yet the ability of a PPP to deliver in Brazil where the government has failed is reflected in Salvador's experience with Line 1, the sole rail project to open in time for the World Cup.

Work began on the project in 2000 but political wrangling and contractual disputes resulted in continuous delays. By 2008 work on the 7.6km Lapa - Retiro section was complete, and new trains were delivered in 2010. However, the municipality could not afford to meet the running costs of the line, leaving the track to rot and the trains to stand motionless.

A subsequent standoff between a populist mayor and a pro-government state administration led to further delays until a new city government reached an agreement with the state administration last year, paving the way in October 2013 for Brazilian infrastructure concessionaire CCR to secure the build-operate-transfer contract to complete the work on Line 1.

It did so by June 11, two days before the first World Cup match in the city introducing a 10-minute interval service. Services have subsequently been ramped up this autumn and operations are set to be extended over the remaining 4.3km section of the first phase of Line 1 between Retíro and Pirajá in early 2015. It is also pushing ahead with the 24.2km east-west Line 2 under a Reais 4bn contract.

Mr Roberto Labarthe, new business executive at CCR, says that the fund's work shows that PPPs can work in Brazil. In addition to Salvador, it has successfully implemented São Paulo metro Line 4 as a PPP project, although he admits this is a unique case "that is hard to repeat" because construction of the infrastructure and tunnels was already underway when the government brought the project to market. CCR is also currently involved in Rio's six-line downtown and port light rail network, for which it secured a Reais 1.6bn contract as the head of a consortium including Oderbrecht Transport and RATP's Brazilian subsidiary in April 2013.

However, Labrathe warned delegates at the 2nd Rail Brazil Tech and Business conference on November 13 that PPPs are not the "panacea the legislators thought they might be." Labarthe said that of 127 PPPs in different sectors currently under analysis, only 14 of these contracts have been signed, pointing to a lack of government stability and a failure to define the roles of the private and public sectors as the reasons that many of the projects are not taking off.

"We need stability so if the government changes we don't have people reinventing the wheel," Labarthe said. "These contracts are 30-year contracts. I have to be responsible to my shareholders for 30 years and if the rules of the game are changing then we are not going to get anywhere. You can change the minister, you can change the government, but you can't change the rules of the game."

Labarthe says that as a prospective investor, CCR and others require assurances that their investments will result in a return. But he also stressed that the public partner should be strong and control the PPP to prevent them being overrun by a private sector only looking to make money. He encouraged them to include terms to entice investments that will benefit both parties in the long-run. He also admitted that CCR has been reluctant to invest in monorail projects due to concerns over their capacity.

"We are ignorant concerning the issues of operating a monorail," Labarthe says. "I usually don't like things of which I am ignorant. I don't like flying aeroplanes, not because I dislike aeroplanes, but because I don't know them. I much prefer to drive a car which I do know. My issue is how do you operate monorails? There is very little information about high-capacity monorails for a company like us to invest."

Taking a European approach to managing urban infrastructure projects was highlighted at the conference, and is favoured by many, including Labarthe, as a means to eliminate political infighting.

He pointed to Madrid's regional transport management model which consolidates regional transport entities into a single body. He said this could avoid disputes currently experienced in large urban areas such as Rio which is made up of multiple municipalities led by different governments with varying interests. Similarly Mr Gustavo Gardini, managing director of business development at DB International, gave a presentation outlining Germany's regional concessioning model, pointing out that since its adoption, public subsidies for urban rail operations have been eliminated.

While Europe does have its problems and is far from the utopia presented during the debate, the emphasis in both speakers' arguments to get politics out of urban transport management is a message that drew favour with other delegates. Labarthe said that under the current model, uncertainty, and concerns over identifying a suitable tariff level, will continue to hold public transport schemes back until a solution is found. He suggested the establishment of a central guarantee fund for infrastructure projects as one possible solution.

"It's easy, it's there, they just need to be convinced," Labarthe says. "If there is a policy for public transport for entire public metropolitan areas, and there are commitments made by the government regarding this policy that were approved, then this needs to be followed."

While progress is certainly being made through the adoption of a public-private model in some areas, the issues experienced in Belo Horizonte, Brasilia and Cuiaba show that the potential for problems still exists. However, with new projects getting underway and progress on other long-term schemes there is optimism in the market. In particular efforts to reintroduce regional services in São Paulo have some dreaming that this may breed similar inter-city restorations elsewhere.

Yet most remain cautious. Without significant reform to the administrative process, it may be some time before Brazilians no longer see passenger trains outside of their larger cities as a novelty. It looks like people will wave at Serra Verde Express' trains for a while yet.

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