Railway in Brazil attracts the interest of Saudis

07 de novembro de 2017

São Paulo – Saudi investors showed to be interested in Ferrogrão, the project of a railway that begins in Sinop, northern part of Mato Grosso state, and runs until Itaituba, Pará state, where the Miritituba port, in the Tapajós Rivers, is located. This and other projects were presented by a Brazilian government’s delegation to executives from Saudi Arabia funds and other financial institutions this Tuesday (7) in Riyadh.

“They showed an interest in assets in Brazil and in strengthening the ties with the country. Projects related to food security attracted a lot of attention, such as Ferrogrão,” said to ANBA by phone the Project Coordination secretary of the Investment Partnership Program (PPI) of the Brazilian government, Tarcísio Gomes de Freitas, who is leading a Brazilian group in a mission through the Gulf’s Arab countries. “There’s a significant interest in the food security sector,” added the CEO of the Arab Brazilian Chamber of Commerce, Michel Alaby, who is part of the delegation.

According to Freitas, the railway attracted the attention especially from representatives from Saudi Agriculture & Livestock Investment Company (SALIC), a state-owned company that invests in agribusiness projects abroad. Currently, SALIC already invests in Brazil. The company holds a near 20% stake of meat processing company Minerva.

Ferrogrão’s purpose is to connect the grain-producing region of Mato Grosso to the so called Arco Norte (North Arc), through where the goods will be exported. Currently, the connection from the Northern part of Mato Grosso to the inland terminal in Pará is done via highways BR-163 (Cuiabá-Santarém) and BR-230 (Transamazônica), with parts of them in very bad conditions. It’s a much closer alternative, however, than the ports of Santos, in São Paulo, and Paranaguá, Paraná, from where the production of Mato Grosso is also exported.

The construction and operation of the railway will be awarded to the private sector. On October 30, a public consultation on the project began. In the assessment of Freitas, if the proceedings of the project don’t stall, the auction notice should be published in 2018’s first four months, with the auction taking place early in the second half. The distance to be covered by the railway is of 933 kilometers, with investments expected to reach BRL 12.6 billion (USD 3.89 billion).

“The construction of a railway demands considerable funding, and the best way to secure that is through many partnerships,” said Freitas. “They (SALIC) showed to be sensitive to the topic, and want more information and further talks,“ he added.

Besides SALIC, the group met with representatives from the Saudi Arabian Monetary Agency (SAMA), the country’s Central Bank; with the Saudi Fund for Development (SFD), the financial institution that fund projects in developing countries; with the sovereign fund Public Investment Fund (PIF), which controls SALIC; and the pension fund General Organization for Social Insurance (GOSI).

Regarding GOSI, Freitas pointed out that the fund is interested in investing in assets that give them long-term returns and wants to search for a fund manager in Brazil. “It’s up to us to make this connection between them,” he said. He mentioned as examples of potential partners to the country funds that invest in infrastructure or that are prepared to do it and need to seek funds. “It’s the job of PPI to also establish this connection,” he said.

The delegation also met with executives from Saudi banks at Brazil’s embassy in Riyadh. Also part of the mission are executives from the Ministry of Transportation, from the Brazilian Development Bank (BNDES), from the Brazilian Trade and Investments Promotion Agency (Apex-Brasil), and the Investments director of the Arab Chamber, Daniel Hannun.

“Now we must perform a good follow-up, since the business outlooks are good,” said Freitas. “Saudi Arabia is a very important country, accounts to near 70% of the Gulf’s economy, so we have to take a very assertive stand, this could generate investments,” he concluded.

In addition to Saudi Arabia, the group already visited the United Arab Emirates, and will now travel to Bahrain, Kuwait and finally Qatar.

*Translated by Sérgio Kakitani