Questions over the completion of the venues and stadiums will inevitably dominate discussion in the build-up, with investigations already highlighting the danger posed by pollution in Guanabara Bay, the venue for the sailing events.

The condition of infrastructure and public transport is another big talking point, particularly with thousands of spectators set to travel to Rio from around the world. Yet while more than half of the transit and airport projects for the 2014 football World Cup, which was held in 12 host cities across Brazil, fell by the wayside, prospects for Rio look better.

Vicente AbateThe city, led by its precocious mayor Mr Eduardo Paes and supported by private enterprise, is investing in the new 28km Porto Marvilha catenary-free light rail network. Testing is underway of the first phase from Santos Dumont airport to Rodoviária Novo Rio which is on course to open in June, in plenty of time for the Olympics, as well as a 16km extension of metro Line 4 from Ipanema to Jardim Oceânico. This line will serve the Olympic village and use new six-car trains supplied by CRRC subsidiary CNR Changchun offering a journey time of 15 minutes between the two termini.

Paes says he wants the Games to offer a long-lasting legacy to the city. Indeed, for every real spent on stadiums, five are going towards initiatives that will benefit public life, with public transport a major beneficiary. In addition to rail, investments in three bus rapid transit schemes in the west of Rio, adding to two existing lines, are another key element of the strategy to help people get around this notoriously congested city, while the demolition of the elevated Perimentral highway is already transforming transport in the city centre.

At the end of 2015 the new projects and improvements to infrastructure were running on schedule, and Paes is optimistic that they will open for the start of the sporting extravaganza. "Things are on track, on time, and on cost which is very important, so we will deliver a great Games," he says.

Rio is a city that knows how to party and the Olympics may prove a temporary respite for Brazil's embattled president Ms Dilma Rouseff. But the Brazilian people are unlikely to be distracted for long. With the country set to endure a second consecutive year of recession in 2016, the worst situation since the 1930s, inflation running at 11%, and unemployment continuing to rise to more than 7%, protests against the government, and calls for Rouseff's impeachment, are set to intensify.

While rising energy costs and water shortages cause some industries to suffer, the prospects for the rail industry are slightly better according to Mr Vicente Abate, president of Brazilian Railway industry Association (Abifer).

"I am optimistic, but with some caution," Abate says. "For rail, things are going well, and certainly better than other sectors of the economy. However, we need to be cautious as we don't know what will happen next year. We believe that the need for railway transport will increase as will integration with other modes like highways and waterways, and that investments in this green mode of transport can provide solutions to some of the problems and invite opportunities for the country."

Abate is particularly encouraged by talks between the government and concessionaires MRS Logistics, Central Atlantic Railway (FCA), and Rumo ALL over extending their operating agreements, which are due to expire in 2026-2028. He says that these discussions are providing the impetus for current concessionaires to invest in improvements to their infrastructure knowing that they will continue to operate services in the long-term.

For example, following its recent takeover of Latin American Logistics (ALL), Cosan-owned Rumo ALL, on condition it secures the extension, is planning to invest Reais 7.4bn ($US 1.97bn) in two phases up to 2019 to improve infrastructure, and buy new locomotives and wagons. MRS Logistics is also planning to spend significant amounts on new rolling stock and locomotives as well as enhancing maintenance and improving line capacity. Vale subsidiary VLI is similarly investing Reais 9bn in doubling its freight capacity and raised Reais 2bn from its latest shareholders, Mitusi, Brookfield and Investment Fund of the Workers Severance Fund (IF-FGTS). Vale itself is investing heavily in rail capacity serving its Carajás iron-ore mine, the world's largest, in an effort to boost production and improve the efficiency of its operations as it continues to extract large quantities of its high-quality iron-ore despite a price slump.

"They are aiming to complete this project by June 2018 and it will enable them to transport 450 million tonnes of iron-ore per year," Abate says. "They were set to produce 340 million tonnes in 2015, which is a record level of production, and for our industry is not so bad."

In addition Abate says recent revisions to Brazil's Investment Programme in Logistics (PIL) should provide concessionaires with greater confidence to support investments in new infrastructure, a key government policy to boost economic growth.

"PIL is now in its second phase after the first phase, which was launched in 2012, did not work," Abate says. "The 2012 programme was a success for highways and airports, but for railways and ports it did not happen. We did not have any projects."

New policy

The new policy envisages investments of Reais 86.4bn with Brazil's National Bank for Economic and Social Development (BNDES) able to provide finance at low interest rates for up to 70% of the cost of the projects as long as there is some degree of private investment. The concessions will mirror those on the existing network where a single concessionaire is responsible for operating services and maintaining the line, deserting the previous open-access model which was unpopular with investors due to the perceived over-reliance on federal agency Valec.

Rio Light RailAlready studies are underway of two broad-gauge lines from Lucas do Rio Verde to Miritituba, which will require an investment of Reais 9.9bn, and Açailândia to Barcarena, an extension of the North-South line which requires Reais 7.8bn to complete. Both projects will support the transport of commodities to river ports in the north of Brazil.

Abate says he expects progress on a further three schemes in 2016 with a view to boosting the transport of soybeans and other agricultural goods from the heart of the country. In the medium term, or the next three to five years, he says the expectation is for the construction of 4000km of new lines, including 1500km of extensions to the North-South Railway. A long-term investment, but one which he expects to see movement in 2016, is the 3500km line from Santos to the northern Peruvian port of Paita. "The Chinese are interested in this line and are due to submit a study for it in May 2016," Abate says.

For the Brazilian supply chain, Abate says provisional results are better in 2015 than anticipated. Brazilian-based companies produced 4700 wagons, 1200 more than anticipated at the start of the year. Locomotive production remained slow at 110 units while manufacturers produced 340 passenger vehicles. However, plans to introduce government incentives for concessions to replace ageing rolling stock, some of which is more than 40-years-old, to guarantee a minimal level of production of 1600 wagons and 60 locomotives per year over the next 10 years, which were expected in 2015, have stalled.

"We are still talking to the government, and we are working with them to hopefully use part of a proposed Reais 16bn investment to support this," he says. "We think that if there are government incentives in place, it will give the concessionaires the incentive to renew their fleets more quickly than they are doing now."

Looking ahead, Abate is hopeful that the industry will be able to repeat its 2015 performance in 2016. The aim is to produce 4000 wagons, 100 locomotives, and 470 passenger coaches and he says that due to the current low value of the Real, exports may be a way for manufacturers to boost their performance, particularly in Asia, other South American countries and Africa. He adds that upcoming transit projects, many of which were promised for the World Cup, should boost passenger vehicle production.

In addition, if an agreement is reached on incentives for renewing ageing rolling stock, Abate is hopeful that this will encourage companies to take on more staff, which will help the economy as a whole. "If we can produce 5000 wagons, that means we can increase labour by another 2000 people," Abate says.

Yet in what seems like a never-ending recession with a government seemingly unable to release the shackles of negative growth, the rail industry, while in better shape than many others, is holding its breath. The Olympics aside, 2016 is shaping up to be another difficult year for Brazil, and repeating what was achieved in 2015 is probably the very best the industry can hope for.

"There are always concerns about this because the economic situation of the country is in," Abate says. "GDP is set to fall by 3% in 2015 and another 2% in 2016. So if we can sustain those levels we will be happy."