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Controversial high-speed rail project said to be over budget and under revenue projections
BRASILIA, Brazil — Brazil is moving forward with plans to build a bullet train that will whisk passengers between Rio de Janeiro and Sao Paulo at 174 miles per hour, despite a report by government auditors that the project’s cost is impossible to determine.
Budgeted at almost $19 billion, the project is one of the largest infrastructure investments in Brazil’s history, but its price tag could triple since geological surveys done along the route were less than 5 percent the necessary minimum, the audit report found.
“New studies need to be carried out,” the report states. “Under current conditions, competition is greatly reduced and there is an unacceptable level of risk and uncertainty with a high potential for alterations in the cost of the works.”
The audit report also declared that revenue estimates based on government studies demand were biased and imprecise, putting the project’s long-term solvency at risk.
Even so, the country’s fiscal oversight agency approved the bullet train’s viability studies and the bidding process for the contract was opened in July.
The railway will be built via concession to a private consortium that will carry out construction, operation and maintenance of the line for 40 years.
France's Alstom, Germany's Siemens and Canada’s Bombardier are among the possible contenders for the contract.
Bids will be ranked by the cheapest fare, with the maximum price not to exceed R$199 (about $112) for an economy ticket for the hour-and-a-half trek between Rio and Sao Paulo.
Hour-long flights can be found online for about half that price, but the director of the government agency in charge of the project’s development said discount airfare will not hinder demand for the bullet train, which will also link Sao Paulo with the city of Campinas, located in the interior of the state.
“The transportation infrastructure between Rio and Sao Paulo is over-saturated, both in terms of airports, bus transit and highways,” said Bernardo Figueiredo, looking out over the Brazilian capitol from a conference room on the top floor of the National Ground Transport Agency.
“The high-speed train will connect the region’s three major airports to the city centers,” Figueiredo said. “It will also permit the development of the region, allowing the population to live outside the city center without facing problems of access.”
In order to oversee the project’s development and management, as well as the eventual transfer of technology from the operating consortium, the federal government will create and retain a majority share in a closed capital company which will be called ETAV.
Up to 60 percent of the funding will be covered by a loan from Brazil’s National Development Bank, which will be paid back over 30 years via the operating consortium’s revenues.
If the price of the project rises or ridership is less than expected, the consortium could face financial trouble, but Figueiredo said public money won’t be at risk.
“The government is not going to increase its participation,” he said recently. “The risk applies to the consortium, and it will have to look for other financial sources to cover costs that exceed the project’s budget.”
The World Cup in 2014, which will be hosted in Brazil, and the Rio Olympics in 2016 could both provide spikes in ridership, but the project’s guidelines stipulate that the train be completed by 2017.
Still, top politicians are hoping to have the train operational ahead of schedule.
“Obviously, we want a large part of the infrastructure that we are building to be ready by the Olympics,” said former Brazilian President Luis Inacio Lula da Silva, speaking at the opening of the contract bidding process in July.
“I think it’s completely possible that we inaugurate this project by 2016,” he said.
Bids for the contract must be turned in by the end of November. The victor will be announced at an auction in Brasilia on Dec. 16.
Once the contract is signed, the winning consortium will have to apply for an environmental license for the final plan for the railway before construction can begin.
Complications not withstanding, the groundbreaking is expected to occur before the end of 2011.