On August 30, 2021, Brazil’s Federal Government enacted Provisional Presidential Decree (Medida Provisória – MP) no. 1,065/2021 to allow for the possibility of privately operating railroads by means of authorizations.^[1] By creating this system, which did not previously exist at the federal level, the MP was meant to facilitate the operation of rail transport infrastructure by the private sector without the need for complex concession bidding procedures, thereby enabling a simpler and more agile type of grant. As an example of this authorization system, a company could be granted the right to operate a railroad by its own initiative, upon request, or through competition with other companies in a public call initiated by the government.

Shortly after the MP was published, several companies released statements that they would be applying for railroad authorizations.^[2] While the new authorization system attempts to streamline and simplify the process, the MP, however, goes against global trends to promote sustainability in all sectors of the economy, including – and especially – in the infrastructure sector. As such, adjustments must be made to rectify procedural, governance, and transparency issues, all of which currently have the potential to jeopardize the analysis of projects’ social and environmental aspects.

Previous analyses from Climate Policy Initiative/Pontifical Catholic University of Rio de Janeiro (CPI/PUC-Rio)^[3] have highlighted the lack of procedural clarity in the viability phase of federal railroad and highway concessions and demonstrated how the lack of clarity can be detrimental to the assessment of social and environmental aspects at the beginning of a project. They have also noted a lack of transparency at different stages of concession life cycles with potential impacts on effective compliance with the criteria for obtaining green financing, such as green bonds and green loans. Lastly, they have identified governance problems that can affect the way projects’ social and environmental aspects are considered. In this Technical Note, CPI/PUC-Rio researchers draw off previous work and outline how the legal framework for railroad authorizations suffers from similar problems, as described in Table 1. As such, if the original MP were to prevail, the opportunity to strengthen the viability phase of authorization projects and therefore to improve their socio-environmental analysis may be lost.

Table 1. Problems with the Legal Framework for Railroad Authorizations

Source: CPI/PUC-Rio, 2021

It should be noted that the MP about railroad authorizations was published despite the existence of Senate Bill (Projeto de Lei – PL) no. 261/2018,^[4] currently under consideration, which focuses on the very same topic. As such, the assessment of the viability phase of railroad authorizations, set forth in this document, should consider the MP and the PL. First, because the authorizations granted while the MP is in force will, in principle, be governed by it.^[5] Second, because the PL, if passed into law, will become a more definitive landmark from a regulatory standpoint. Third, because there are relevant distinctions between the MP and the PL with respect to the aforementioned problems, even though the Federal Government has stated that the language of the MP and the PL are very similar.^[6] Finally, the government and the Senate struck an agreement to enable the MP to remain in effect until the PL is approved with expediency, to enable the first few authorizations to be granted while the MP is still in force.^[7]

Table 2 (below) provides more detail about the problems outlined in Table 1 and the legal provisions they are most directly related to, in addition to potential solutions. This analysis considers the original text of the MP and the latest version of the PL submitted on August 30, 2021, to replace the original bill.

Table 2. Problems with the Legal Framework for Railroad Authorizations: MP no. 1,065/2021 and PL no. 261/2018^[8]

Source: CPI/PUC-Rio, 2021

---

^[1]     Diário Oficial da União. Medida Provisória nº 1.065. August 30, 2021. bit.ly/3luxExD.

^[2]     Agência Brasil. Com nova MP, governo recebe pedidos para 10 ferrovias. September 2, 2021. bit.ly/3EhOf0a.

^[3]     Cozendey, Gabriel and Joana Chiavari. Viabilidade Ambiental de Infraestruturas de Transportes Terrestres na Amazônia. Rio de Janeiro: Climate Policy Initiative, 2021. bit.ly/35tBfo2.

^[4]     Senado Federal. Projeto de Lei do Senado nº 261. 2018. bit.ly/3nLGmKu.

^[5]     “(…) National Congress has the prerogative of disciplining, by legislative decree, the legal relations arising from the enactment [of the MP]. If the aforementioned legislative decree is not published within 60 days, the legal relations established during the period of effectiveness will continue to be governed by the MP” (Congresso Nacional. Entenda a Tramitação da Medida Provisória. bit.ly/3zhNErN).

^[6]     Poder 360. MP das autorizações ferroviárias está pronta, diz Tarcísio de Freitas. August 19, 2021. bit.ly/3CcNvre.

^[7]     Valor Econômico. Governo fecha acordo e MP das ferrovias deve ser enterrada no Senado. September 1, 2021. glo.bo/2XptfUU.

^[8]     About the proposed procedure for evaluating EVTEA and coordinating these studies with EIAs, see: Cozendey, Gabriel and Joana Chiavari. Como a Nova Lei de Licitações Abre Oportunidades para Melhor Prevenir os Impactos Socioambientais de Projetos de Infraestrutura? Rio de Janeiro: Climate Policy Initiative, 2021. bit.ly/3zfWIgB.