Sep 16, 2015

Brazil's "Mega Railroad" Project discussed in Beijing

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

In May of this year, Brazilian and Chinese government officials announced with great fanfare the possibility of building a "Mega Railroad" across Brazil and Peru linking the Atlantic and Pacific coasts. The proposed R$ 30 billion Transoceanic Railroad would be 4,200 kilometers long and connect Rio de Janerio in eastern Brazil with ports on the Peruvian coast while passing through the Brazilian states of Minas Gerais, Goias, Mato Grosso, Rondonia, and Acre.

The state that would benefit the most from this proposed railroad would be Mato Grosso, which is Brazil's largest soybean and corn producing state. In the state of Mato Grosso, the railroad would cross the state east to west (1,400 kilometers) cutting through the heart of the grain producing region of the state. It would facilitate the movement of soybeans, corn, soybean meal, meats and other agricultural products to China, which is the primary purchaser of Brazil's agricultural exports.

Along the proposed route of the railroad in the state, grain and cargo terminals are planned for the cities of Lucas do Rio Verde in central Mato Grosso, Agua Boa and Araguaia in eastern Mato Grosso with a fourth in western Mato Grosso.

Earlier this week, members of the Mato Grosso Soybean and Corn Producers Association and the Pro-Logistic Movement met in Beijing with officials from the China Railway Eryuan Engineering Group Corporation Ltda. (CREEC) to further discuss the potential for the project.

The president of the Mato Grosso Soybean and Corn Producers association Ricardo Tomczyk, and the director of the Pro-Logistics Movement, Edeon Vaz Ferreira, made presentations concerning the potential for grain production in the state and the need for the proposed railroad. Tomczyk emphasized that the state could produce 150 million tons of grain annually, but that the "Northern Arc" of ports on the Amazon River could only accommodate 70 million tons of exports annually.

Tomczyk also emphasized that obtaining the needed environmental licenses should be a priority and that everyone involved needed to be flexible in this regard. The final cost of the project was not divulged by the company, but they stated that they expected to recoup their investment in ten years. Currently there are 120 individuals working on the project in China and five individuals working at the company's office in Brasilia.

The results of an economic viability study are expected in May of 2016 and if all goes well, construction could begin in 2018 with completion in 2025.

Brazil is currently undergoing a severe economic slump and the government recently announced significant budget cuts including infrastructure projects, so there is no guarantee that such a massive project will get the green light. Critics of the project point out that money would be better spent on improving the current infrastructure in Brazil instead of embarking on such a massive new railroad.