THE Brazilian government is evaluating a temporary two-year extension of the Central Atlantic Railway (FCA) concession to ensure that freight operations continue when the current contract expires in August. The proposal comes as negotiations continue over full early renewal of the concession held by VLI Logistics.

A temporary addendum of up to 24 months is permitted where there is insufficient time to complete the full renewal process, and there is the risk of what officials at the National Land Transport Agency (ANTT) describe as a “service blackout” if no operator is appointed. The proposed extension would keep the existing contract in force pending final approval of the new concession by the federal government and the Federal Audit Court (TCU).

FCA is Brazil’s largest freight concession, spanning more than 7000km and serving the states of Minas Gerais, São Paulo, Rio de Janeiro, Espírito Santo, Goiás, Bahia and Sergipe. The current concession was originally awarded in 1996 with a 30-year term.

Under the early renewal agreement now being negotiated, VLI would receive a new 30-year concession while committing to undertake substantial infrastructure work. The proposal includes mandatory investment estimated at Reais 28bn ($US 5.2bn), including new alignments to avoid built-up areas in São Félix and Licínio de Almeida in Bahia, providing dual gauge on sections of the FCA network under the West-East Integration Railway (Fiol) project, and upgrades in Minas Gerais.

The federal government estimates that directly awarding the new concession requires an upfront payment of Reais 1bn versus Reais 1.9bn if it were put out to tender. Bundling loss-making and profitable sections of the FCA network under the new direct award would have a net present value of about Reais 5.3bn.

Last year, VLI raised Reais 1bn in debentures to fund investment projects at FCA, intending to draw down this funding as soon as its concession is renewed.

ANTT approval of the final renewal report is expected next month, which would then be submitted to for ministerial approval and to TCU. It is hoped that the contract can be signed in August.

Concession fast-tracked

Separately, the federal government has reprioritised the long-planned EF-118 concession or Southeastern Railway Ring, granting the project higher priority within its freight concessions programme and bringing award forward by 12 months. The Ministry of Transport has now formally the approved and published the concession plan, clearing the way for a tender and award by auction planned for June.

The new 575km freight line will link Nova Iguaçu in Rio de Janeiro state with Santa Leopoldina in Espírito Santo, improving rail access to key ports including Açu, Ubu and Central, and reducing reliance on congested highways.

The federal government estimates the capital investment required at approximately $US 1.32bn, with operating expenditure of around $US 720m over the concession term. The new line is designed to carry up to 24 million tonnes per year.

Leonardo Ribeiro, secretary of national railway transport at the Ministry of Transport, says approval of the concession plan for “the country’s first greenfield rail concession” marks the launch of the government’s new concession policy, announced in November 2025. The structure of the concession enables the federal government to “participate financially to balance risks and attract private investment,” he says.

Leonardo Ribeiro discusses Brazil’s new approach to project funding in IRJ’s February issue.

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