Roads – between PAC and concessions

Federal government develops solutions to unlock investments in logistics, with emphasis in the interfaces between roads and other means of transportation

There is no way to excuse Brazilian delay in improving its road network. The facts speak by themselves. At the edge of a collapse, Brazilian logistic has huge necessities but their answers and solutions go on like a turtle walk. Everybody pays the bill through high transport costs of products for internal consumption, lack of competition of the country in foreign trade and delays and losses for the consumers. Logistics do not include only roads, but roads still are the main arteries of Brazilian internal trade, since the retaking of the railway network restoration will probably take time to become effective, as well as the real insertion of waterways as an alternative or as part of an integrated system involving the different means of transportation.

The cause of Brazilian difficult is obvious: the continental dimensions of the country were a problem since decades ago due to the incapacity of investment by the government. But the truth is that the expansion cycle of the agribusiness in the direction of the inland borders—that has already annexed the whole Center-Western region, part of the Northeastern region and is going quickly to the Northern region—exposes even more the problems of Brazilian regional integration.

From some time ago, the economic axis formed by the states turned to the sea—such as São Paulo and Rio de Janeiro—is being transferred to the inland, where an important part of the industry is moving to. While these regions are now encouraging an economy based on services and technology, industries like food, pharmaceutical, steel and others are moving to the country inland.

It is also in the inland that the largest power generation projects—such as the hydroelectric plants of Santo Antonio, Jirau and Belo Monte—are demanding a large number of workers, machines, equipment and raw materials. All these factors enhance the valves of inter-regional transport that demand mostly resources of the federal government, usually insufficient. It is a heavy burden by which all Brazilians are paying a very high price.

Roads X Gas Tax

Besides the enlargement of the economic borders, roads lost— in the last year—one of their main sources of financial resources for maintenance. Since July, 2012, the revenues of Cide (Contribution of Intervention in the Economic Dominium) were not available for investments in the transport area. This tax—that was a percent calculated on fuel consumption—was turned into zero by a government decree, to prevent rising in the cost of gasoline, diesel and ethanol for the consumer.

If the end of this tax brought a relief to Brazilian people, it also generated concern in the area of infrastructure works, mainly those connected with road construction and maintenance. Currently, this is considered one of the causes of the difficulties that are being faced by state and municipality governments to maintain their roads.

The red signal was already lit by José Alberto Pereira Ribeiro, president of the National Association of Road Work Contractors, that alerted for the reduction of R$ 7.4 billion in the investments on transport logistics. “Turning the Cide into zero, Brazil is compromising its future”, said the executive, emphasizing that Brazil is in opposition of other countries. “China, India, South Korea, Russia, South Africa and other emerging countries invest currently more than four percent of their GDP in transport infrastructure, with appropriate taxes. Brazil invests less than one percent and without this income has no money to invest”, completed.

In Brazil, the Cide was adopted by the first time in 1946, being effective till 1988. In 2002 it was recreated, this time as a tax over fuel consumption. Together with the return of this tax ten years ago, the Dnit (National Department of Transport Infrastructure) was created as a multi-mode organ that could finance works of expansion and maintenance of roads, railways and waterways.

In a conference carried out during the event Concrete Show South America, this engineer highlighted the importance of planning in the area of infrastructure and the Program of Growth Acceleration - PAC that— according to him—brought a new direction to the country. He also highlighted the Program of Investments in Logistics (PIL). “It is a unique program that starts a new era and shows the decision of government in investing in infrastructure after decades of abandon”. But he also highlighted the uncertainties and concerns of the industry, mainly with the lack of public management, the strike of Dnit—now finished—and the end of Cide.

About the management crisis in the industry of transport—that had its climax with the fall of the Ministry of Transports, Alfredo Nascimento—there was no solution till nowadays, according to him. For the executive, labor is as important as planning and resources. He remembered that Dnit “has currently only 2300 workers and 3000 contracts in course in all areas.” He  also talked about the Regime Diferenciado de Contratação – RDC (Differential Regime of Contracting), adopted by the government  emphasizing that in 2012 the Dnit auctioned “16000 km and contracted 10000 km."

Survey of CNT: scenario will be worse in 2013

Roads 2013, a survey carried out by CNT (National Confederation of Transport) every year shows that the conditions of Brazilian roads worsened in the last year. According to the survey, 63.8 percent of the total extension that was analyzed presented problems related to three items considered fundamental: pavement, signalization and geometry of the road. In 2012, this percent was of 62.7 percent. CNT checked 96714 km of roads, what means the complete paved network of federal roads and the main state-owned roads. Points evaluated in the pavement include conditions to attend features such as capacity of supporting effects of bad weather and structure strong enough to resist to the wear and ensure the flow of water (draining). Results showed that 46.9 percent of the checked length had deficiencies.

About signalization, the survey indicated that 67.3 percent of the length that was checked had problems. Data about roadbed geometry are also concerning: 77.9 percent are not in good conditions. Geometric requirements of the road affect the drivers’ capacity to maintain the control of the vehicles and to identify dangerous situations. The construction of inappropriate geometric projects limits the capacity of traffic, increases operating costs and may cause accidents.

Senator Clésio Andrade, president of CNT, highlights that these figures show an urgent necessity of increasing the investments in Brazilian roads, mainly in duplication. “Government has a management difficulty. Many projects do not come into reality. There is an excess of bureaucracy. Investments have to be increased to give more competitiveness to Brazil”, says him.

Clésio Andrade says that only 33.2 percent (R$ 4.2 billion)  of the total of R$ 12.7 billion approved by the government for roads in 2013 were effectively spent till the beginning of October. In 2012, the government spent R$ 9.4 billion (50.3 percent of the approved total, R$ 18.7 billion). CNT estimates that the minimum investment needed to improve road structure is of R$ 355.2 billion. The president of CNT emphasizes that this lack of investment was being common during last years.

Concessionaire-operated roads were the best-evaluated in the survey of CNT. Concerning to general conditions, 84.4 percent were classified as optimum or good and only 15.6 percent remained in the concept of regular, bad or very bad. The situation is inverted when public roads are analyzed: 27.6 percent are in optimum or good conditions and 73.3 percent are not in satisfactory conditions.

Investments in roads are reduced

According to the site of the non-governmental organization Contas Abertas (Open Accounts), the applications of the National Department of Transport Infrastructure (Dnit) were reduced in 20 percent from January to August of this year, if compared to the same period of 2012, when R$ 5.4 billion were invested. In constant values updated through the IGP-DI of FGV, this reduction represents a real drop of R$ 1.1 billion. Till the end of August, R$ 4.3 billion were invested by the Dnit, that spent more R$ 360 million in current expenses and R$ 245 million in salaries and social charges. The total of disbursement was R$ 4.9 billion during the first eight months of this year, according to data of the Integrated System of Financial Management of the Federal Government (Siafi).

Among the payments carried out by the Dnit, the highest value was sent to “payment of debts from infrastructure works.” The amount paid was of R$ 252.8 million, that corresponds to 5 percent of the total paid by the organ. More R$ 234.6 million were paid to Companhia Docas do Estado de São Paulo (Codesp), as recovery expenses.

The highest investment occurred in the works of adjustment of a road section in the border of the states of Sergipe and Bahia, the junction of BR-324 and BR-101 in the state of Bahia, where R$ 173.1 million were spent. The works carried out in the same road, in the borders between the states of Rio Grande do Norte and Paraíba and between Pernambuco and Paraíba, in the state of Paraíba, received R$ 171.3 million. In respect to forecast of other investments in the BR-101, that crosses 12 states, from Rio Grande do Norte to Rio Grande do Sul, Dnit informed that is developing the studies for the duplication of a section between Mucuri and Eunápolis, in Bahia, in a length of 221 kilometers.

Road concessions: yes or no?

The result of the first auctions carried out by the government for concession of federal roads was disappointing but may have been an apprenticeship. Private initiative did not present any offer for the BR-262, that connects the states of Espírito Santo and Minas Gerais and is one of the most important corridors of cargo transportation in the country. The concession was bid for a section of 375 km that crosses 22 cities. The government said that did not understand the lack of interest of the investors since several changes were made in the publication to match it with their interests.

On the other hand, the consortium Planalto was the winner of the auction for a segment of the BR-050 between the states of Goiás and Minas Gerais. The group presented a toll offer of R$ 0.04534 per km (or R$ 4.534 per 100 km) that represents a reduction of 42.38 percent in relation to the top value of R$ 0.0787 established by the government. Toll will start to be charged in the next year.

The program of concessions of roads and railroads was started in August, 2012 by the president Dilma Rousseff and will have investments of R$ 133 billion for extension and improvement of the road and railroad networks. Investments foreseen are of R$ 91 billion in 10,000 km of railroads and of R$ 42.5 billion in 7,500 km of roads, besides the duplication of nine sections of the main road axes of the country.

Government publishes results of PAC 2 in roads

According to the 8th balance of PAC2, published in October by the federal government, 2634 km of roads had their works concluded during this year. Among the works concluded—according to the government—there are the construction of the Road Ring of Vitoria (ES) in the BR-101; duplication of the BR-050 (MG) between Uberlândia and Araguari; paving of the BR-487 (PR) between Cruzeiro do Oeste and Tuneiras do Oeste; duplication of the BR-101 (PE), between the border of the states of Pernambuco and Paraíba and Igarassu; and construction of the BR-158 (MT) between Alô Brasil and Ribeirão Cascalheira.

According to the balance, there are works still being carried out in a total length of 7150 km, being 2643 km of duplication and adjustment and 4507 km of construction and paving, with highlights for the duplication of the BR-101 (SC) between Palhoça and the border with Rio Grande do Sul, that has 98 percent of the works concluded, and for the duplication of BR-060 (GO) between Goiânia and Jataí, with 77 percent already finished.

In the PAC works, also stand out the contracts of Restoration and Road Maintenance (Crema), that foresee a long-term model of maintenance and already include 66 percent of the maintenance works that are being carried out in 51790 km of roads.

The government expects to enhance the improvements of the industry joining the investments of PAC with the Program of Investments in Logistics (PIL). In the road sector, the program foresees the concession of 7000 km of roads with an investment estimated in R$ 46 billion, whose main purpose is to improve the integration between roads, waterways, ports and airports.