It is one of Latin America’s biggest technology and civil engineering contracts, valued at just under US$17bn. It could transform passenger travel in Brazil’s densely populated Campinas – São Paulo – Rio de Janeiro urban area. But Latin America’s first bullet train project isn’t moving just yet: on 12 August the deadline for presenting bids was postponed for at least a year. Some now think it may not happen at all.
Transport Minister César Borges said the main reason to postpone the deadline for the Trem de Alta Velocidade (TAV) project was that only one consortium, led by Alstom and SNCF of France, was ready to present its detailed bid to build and run the trains, part of a group of contracts worth an estimated BRL38bn (US$16.7bn). Officials say the government has received assurances from Spanish and German consortia (led respectively by Construcciones y Auxiliar de Ferrocarriles (CAF) and Siemens AG) that they will definitely present competing bids if given more time – and so the deadline has been set back by approximately a year, to “the second half of 2014”. The authorities also hope that other groups from Asia, such as South Korea’s Hyundai and Japan’s Hitachi Construction Machinery and Mitsubishi Heavy Industries may be persuaded to bid too.
“It is better to have a competitive process with the greatest number of bidders possible,” Borges said. This is in fact the third postponement of bidding for the project. The first deadline was April 2011, at a time when the government believed the work could be completed in time for the 2016 Olympics in Rio de Janeiro. That deadline was pushed back to July of the same year, but no bids were received. Then it was delayed to August 2013, and now the deadline has moved again, back to 2014.
According to some reports, this time round the Spanish bid was knocked back by the catastrophic 24 July accident near Santiago de Compostela in which 79 people died. The Spanish rail company Renfe, a member of the CAF-led bidding consortium for TAV, operated the train that derailed. Brazilian regulations exclude from the bidding any company operating high speed trains that has suffered a fatal accident in the last five years. Sources say however that Renfe explained that the accident occurred on a non-high-speed stretch of railtrack, with a train that had a maximum speed of 240km/h (high speed trains are defined as those that can travel at 250km/h or more). So technically Renfe is not in fact barred from bidding.
However, this same provision has effectively excluded China Railway Corporation (CRC) because of a 23 July 2011 collision between two high-speed trains in the suburbs of Wenzhou, which left 40 people dead. Officials say that CRC could nevertheless provide rail parts for the project. This may be academic, however, as Chinese sources note that so far companies involved in the domestic high-speed rail business have not sought to export their expertise.
The TAV project has been a long time in the making. It is conceived of as a 511km high-speed rail service linking Campinas, São Paulo and Rio, built in two phases and coming into service in 2020. It would initially be run as a 40-year concession. Feasibility studies suggest 40m passengers could use the service in the first year, rising to 100m by the end of the concession in 2060. Trains would travel at 350km/h and reduce the travelling time between São Paulo and Rio to two hours, thereby easing the heavy congestion that currently exists on shuttle flights between the two cities.
Observers note that the absence of competing bidders was not the only factor at play in the government decision to delay the bidding. The administration led by President Dilma Rousseff has been severely shaken by an outbreak of national protests that swept the country from June onwards. The unrest initially focused on the cost of public transport, and then widened to include corruption and what was perceived as wasteful spending on prestige investment projects (such as the construction of new stadiums ahead of the 2014 World Cup football tournament that Brazil is due to host). Building the bullet train could therefore be a political hot potato. Arguably, it could be seen as a positive response to middle class protests, easing their commuting problems – or, alternatively, as yet another overpriced white elephant pursued by an out-of-touch government. To make matters more sensitive, the government had just approved new anti-corruption legislation (largely as a result of the protests), and is investigating some of the companies bidding for TAV, who are alleged to have engaged in cartel-like behaviour in pursuit of other public sector contracts. For example, prosecutors have launched an investigation into alleged price rigging in São Paulo’s metro rail services in 1999-2009.
Empresa de Planejamento e Logística (EPL), the government’s transport planning company, says it is possible to delay the bullet train bidding deadline from 2013 to 2014 without compromising the 2020 start date for the service. It had already been envisaged that there would be a separate bidding round in 2014 for companies to build the infrastructure and track. The result is that the deadlines for both elements of the overall project are now set to fall together in the second half of next year.
But this is where the sceptics come into their own. The next Brazilian presidential elections are due in October 2014 and President Rousseff’s term in office ends in December of the same year. So the question being asked is whether an outgoing and possibly lame duck administration will really want to take a final decision on the TAV project during its last months in office. It would make more sense it is suggested, to kick the ball forward once more, allowing a newly elected administration, which will enjoy greater authority and legitimacy, to take the decision in early 2015. According to the daily O Globo, some officials have already begun looking into a cheaper alternative: rather than a bullet train, a medium-speed alternative passenger rail system.
As it happens, the state of São Paulo is studying a separate proposal to launch a 431km medium-speed intercity passenger rail network as a public-private partnership (PPP). Initial studies put the cost at BRL18.5bn, which for each kilometre of track operated would be approximately 61.4% of the comparable cost of the bullet train. Lawyer Rodrigo Matheus, a specialist in public tendering, says “it is unlikely that the TAV initiative will be re-started during the current government, so the entire project could be put into the hands of the succeeding administration”.
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