Rumo Logistica will most likely fight the ruling in court.

A decision by a Brazilian regulator threatens to slow investments in containerzied rail capacity aimed at reducing bottlenecks and offering more services to shippers at Santos, South America’s busiest port.

The Federal Public Ministry, which oversees various concession processes and rules on cartels, said a concession to invest 1.2 billion reais ($370.5 million) over five years had to be re-tendered because “there were no other bidders for the tender,” when the bid was placed earlier this year. Now, both sides are gearing up for a legal fight.

“The railroad operator will defend the current status quo vigorously through its lawyers in the courts,” a source close to Rumo Logistica, one of the companies involved in the tender, told JOC.com.

“We are not going to leave alone or delay the tender for new rail terminals and services, and we will bring in new investment as soon as possible to reduce the bottlenecks,” Marco Aurélio de Barcelos Silva, director for the federal government’s Partnership and Programs for Investment, said at the Santos Export trade show this week. “But there must be competition for all public tenders.”

Rail volume at the port over the last five years has increased from 700,000 metric tons to 25 million tons, and the port authority Codesp and the Ministry of Transport want that to double over the next five years. Much of the money in the new tender would go to railroad track, rolling stock, and bridges.

Portofer Transportes Ferroviaria won the original tender to operate rail facilities in Santos in 2000. Rumo this year teamed up with MRS Logistica and VLI Logistica to form a consortium, Consorcio Ferroviaria, and bid on the new tender.

The ministry contends that the setting up of Consorcio Ferroviaria when the three companies could have bid against each other for the concession, and the fact there were no other bidders, proves that the companies formed a cartel and monopoly in violation of the law. 

The companies are upset because they say the decision to form a consortium had the blessing of the ports ministry and Codesp, the Rumo source said.

The conflict could have its roots in a decision to fold the ports ministry into the Brazilian Ministry of Transport. That shake up may have caused political infighting among members of the bureaucracies who viewed the issue differently, one reliable Santos source speculated.

The whole affair is another reason for establishing independent port authorities free from political machinations, the source said.

Currently, port authorities like Codesp have their directors appointed by the ruling parties in the capital, allowing them to extract payments to pay for party campaigns, elections, and the like in a semi-official party funding process.

Contact Rob Ward at rcward788@btinternet.com.