Making up for lost time public transportation in brazils metropolitan areas

Making up for lost time
Public transportation in
Brazil’s metropolitan areas
A report from the Economist Intelligence Unit

Sponsored by


Making up for lost time
Public transport in Brazil’s metropolitan areas

Contents

1

Preface

2

Introduction: congestion and its costs

3

Why cars can’t be the answer

7

Weighing up the options

9

Getting the right balance of private participation in public transport investment

14

Conclusion

16

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

Preface

Making up for lost time: public transport in Brazil’s metropolitan areas is an Economist Intelligence Unit
research report, sponsored by Accenture do Brasil. The Economist Intelligence Unit conducted the
research and analysis and wrote the report. The author was Alencar Martins Izidoro and the editor was
Katherine Dorr Abreu. Mike Kenny was responsible for the design.
The Economist Intelligence Unit would like to thank all those who contributed their time and insight to
this project.
November 2011

2

© Economist Intelligence Unit Limited 2011


Making up for lost time

Public transport in Brazil’s metropolitan areas

Introduction: congestion and its costs

Wasted time and
fuel consumed in
traffic congestion
cost the city of
São Paulo nearly
US$21bn (R34bn),
or 10% of the city’s
economy, in 2008.
Marcos Cintra, Professor
Fundação Getúlio Vargas

O

n June 10th 2009, 293 km of traffic clogged the streets of São Paulo. Equivalent to almost one-half
of the distance between Lisbon and Madrid, this congestion stopped traffic in over one-third of the
city’s monitored streets. This is merely the most extreme instance of the city’s familiar routine: in 2010
the average daily afternoon back-up totalled 108 km. That such information is available on a daily basis is
in itself telling: São Paulo’s traffic is chaotic and its economic impact profound.
Over the past decade, Brazil’s sustained economic growth and a rapidly emerging middle class have
reinforced the country’s position as a leading emerging market. However, its infrastructure quality
ranks only 46th out of the world’s 82 largest countries in the Economist Intelligence Unit’s Business
Environment Rankings.
Considering Brazil’s very high degree of urbanisation (84% of the population lives in urban areas,
one of the highest rates in the world), its inadequate urban transport infrastructure constitutes a major
hurdle to the country’s continued development. Its public transport systems create gridlock, a costly
physical barrier to economic and leisure activities. In contrast, efficient public transport systems improve

cities’ liveability, enabling them to attract the talent and business investment needed to spur the
entrepreneurship and innovation that underpin vibrant and sustainable economic growth.
Marcos Cintra, economist and professor at FGV (Fundação Getúlio Vargas, a Brazilian higher education
institute), calculates that wasted time and fuel consumed in traffic congestion cost the city of São
Paulo nearly US$21bn (R34bn),1 or 10% of the city’s economy, in 2008. Virtually all major Brazilian
urban centres suffer severe transport bottlenecks, which are becoming an increasing weight on Brazil’s
international competitiveness.

Outgrowing the infrastructure

1. All figures in reais were
converted into US dollars at an
exchange rate of US$1=R1.60.
The Real has suffered substantial
volatility in the second half of
2011, so the values should be
considered in that light.

3

In 2010, Brazil’s gross domestic product (GDP) grew by 7.5% in real terms (its highest rate in 25 years).
After slowing to around 3.6% in 2011, the Economist Intelligence Unit forecasts annual average growth of
4.5% in the medium term.
Urban public transport infrastructure development has lagged behind the economy’s growth for
decades. Subway networks serve relatively few; buses are often of poor quality, very crowded and compete
for space with private traffic. Perforce, a rapidly expanding middle class has chosen cars and motorcycles
as the preferred transport mode.
© Economist Intelligence Unit Limited 2011

Making up for lost time
Public transport in Brazil’s metropolitan areas

Glossary
BRT—Bus Rapid Transit. BRTs use dedicated lanes to segregate buses from the rest of the traffic. They look like a
rail system, although buses must still adhere to traffic lights and pedestrian crossings.
High-capacity transport mode—Able to carry large numbers of users per hour.
Light rail systems—Rail systems with lower capacity than subways and urban railroads.
Motorisation rate—Number of motor vehicles per 100 inhabitants.
Ring road—Road that encircles a city and functions as a bypass for through traffic and a connector for outer
suburbs.
Trip—Any journey made using any means of transport and for any reason, such as work, education and leisure.

Transport infrastructure is inadequate throughout this continental-sized country. In rural areas,
railways for passenger and freight transport are scarce, while poorly maintained roads hamper movement.
The problem is especially acute in the largest cities. A rapidly growing fleet of cars has increased
the rate of motorisation in major urban centres to levels approaching those in developed countries.
In 2010, Brazil ranked fourth worldwide in terms of annual registration of new vehicles, up from ninth
ten years ago. Whereas Brazil’s population grew by 11% in that decade, its annual vehicle registration
increased by 120%. The Economist Intelligence Unit expects that vehicle penetration will increase by 41%
between 2010 and 2015, further straining the road network. Adding to the pressure is that the supply
and the quality of every mode of public transport in Brazil’s major cities lags far behind developed-world
standards.
Brazil moves up in new vehicle registration ranks

China *
United States
Japan
Brazil **
Germany

India

New vehicle registration in selected countries, 2001-2010
20,000
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Note: The data comprise sales or registration of nationally manufactured and imported vehicles. (*) Domestic sales. (**) 2001 data refer to domestic wholesale.
Sources: Anfavea Yearbook 2010

4

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

The most important transport infrastructure investments in Brazil are expected to increase from
US$34bn (R55bn) between 2006 and 2009 to US$80bn (R129bn) from 2011 to 2014.2 However, by some
estimates this falls dramatically short of what will be needed to handle major international events such
as the 2014 FIFA World Cup and the 2016 Summer Olympic Games. The CNT (National Confederation of
Transport, which represents this sector’s businesses and workers) estimates that the priority projects
(rail, road, airport and port) needed to prepare Brazil for these sporting events require US$250bn
(R400bn) in investment.

Urban rail—derailing growth?
São Paulo’s Metro, Brazil’s only system that meets high quality standards, has a mere 74 km of track to
serve a metropolitan region of 20m inhabitants sprawled over 8,000 sq km. Rio (population: 11.5m)
has less than 50 km. By comparison, Madrid has almost 300 km of track to serve a population of 5m
inhabitants, and New York’s metro area (population: around 19m) has more than 400 km of subway track.
The discrepancy is only partly the result of a late start in building subway systems. London’s metro
system dates from 1863, whereas São Paulo’s first line only opened in 1974. But Mexico City began building
its rail system at about the same time as São Paulo and now has nearly three times more subway track.

São Paulo’s subway system: enough to serve 20 million?
Existing system (km)
Planned extension 2008-2011 (km)

0

Populatiom, m

17

700
600

8

13

500

20

London

Shanghai

New York

Beijing

15

Moscow

12

5

Madrid

21

Paris

Hong Kong

0

4

16

Berlin

100

Santiago

200

19

São Paulo

300

5

Mexico City

400

Source: Office of the UITP (International Association of Public Transport) in Brazil

2. February 2010 report from
BNDES (the government-owned
National Development Bank).
Reports prepared by BNDES’s
Area of Economic Research
do not necessarily reflect
the thinking of the bank’s
management.

5

Urban train infrastructure is also under acute strain. The CBTU (Brazilian Urban Train Company), a
federal company, manages rail passenger transport in five urban centres: Recife, Belo Horizonte, João
Pessoa, Natal and Maceió. Although the number of users of these systems increased by 37% between 2005
and 2010, the system added a mere 9 km of track, from a total of 206 km in 2005 to 215 km in 2010.
© Economist Intelligence Unit Limited 2011

Making up for lost time
Public transport in Brazil’s metropolitan areas

Distribution of transport in Brazil’s major cities, by mode
2003
22%
5%
3%
30%
27%
2%
29%
2%
39%
41%
100%

Local buses
Metropolitan buses
Rail
Public transport (subtotal)
Car
Motorcycle
Private transport (subtotal)
Bicycle
Walking
Non motorised (subtotal)
Total

2009

21%
5%
4%
29%
27%
3%
30%
3%
38%
41%
100%

Source: Mobility system - ANTP/BNDES, with data from 438 cities over 60,000 inhabitants

The bus system stuck in a jam

Gearing up for the football World Cup and
Olympic Games
Preparations for the 2014 FIFA World Cup and the 2016
Summer Olympic Games, which will attract hundreds
of thousands of tourists, are strengthening public
pressure for more efficient mass transit. Projects include
BRT (Bus Rapid Transit) lanes in nine of the 12 cities that
will host World Cup matches, including Rio de Janeiro and Belo
Horizonte. In four cities, including São Paulo and Brasília, light rail
systems such as monorails and trams will receive government loans.
Progress has been slow. In 2010 the federal government launched
a financing plan for transport projects related to the World Cup, but
the details were defined only more than two years after Brazil was
6

selected to host the sporting event. In April 2011, 30%
of the planned projects had still not been awarded.
In the words of Claudio de Senna Frederico, an
international consultant: “There won’t be time to
finish everything.”
Nevertheless, local initiatives indirectly driven
by the World Cup have a positive outlook. São Paulo
is a prime example. “We are moving at Chinese speed,”
promises Jurandir Fernandes, São Paulo state’s secretary for
metropolitan transport. Four rail lines are now being built in São
Paulo; by 2013, there will be 12 under construction. Mr Fernandes
predicts that by 2014 the 74-km underground subway network will
grow to 80 km. There will be 20 km of above-ground monorail, and
another 90 km will be under construction.
© Economist Intelligence Unit Limited 2011

Shutterstock

An inadequate rail system means that, by default, the main form of mass transit in Brazil’s urban centres
is buses. These of course share the congested roads with cars. A study by the NTU (Association of Urban
Transport Companies) in 2008 found that 85% of municipalities with an urban population of over 100,000
inhabitants had no dedicated bus lanes. Besides being slow, traffic-snared buses have higher operating
costs. Bus fare adjustments exceeded inflation between 2005 and 2009 in 77% of cities with more than
500,000 inhabitants, further reducing their appeal to users.
Although buses are still the primary mode of transport in urban areas, they lost market share in the last
decade as a result of rising car ownership and the limitations of the public transport system. Passenger
share is even being lost to motorcycles—including motorcycle taxis, or “mototaxis”—that carry a single
passenger.

Making up for lost time
Public transport in Brazil’s metropolitan areas

Why cars can’t be the answer

P

ublic transport is rapidly losing ground to private vehicles in Brazil, according to a 2011 study by
Ipea (Institute for Applied Economic Research). While about 75% of trips in metropolitan areas in
the 1970s and 1980s were by public transport, by the 2000s that share had shrunk to 50%. Ipea estimates
that public transport will account for between just 18% and 39% of trips by 2025.
Problems of mobility will only escalate with increasing personal vehicle use. São Paulo’s experience is
one example: the average speed of cars on arterial roads during afternoon peak hours is just 16 kph, 24%
slower than in 2000. In 2010, ANTP (National Association of Public Transport) examined the relative costs

General traffic speeds fall on São Paulo’s arterial roads*
25
20
15
10
5
0
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

* Evening peak hours: 5pm-8pm
Source: CET-SP (Traffic Engineering Company)

Public transport loses ground in Brazil’s metro areas
Estimated share of public transport trips
% public transport

1960

% private transport
85

15

1980
75

25

2000-2010
50

50

2025
35

65

* Evening peak hours: 5pm-8pm
Source: CET-SP (Traffic Engineering Company)

7

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

of different forms of transport in Brazilian cities with populations over 500,000 inhabitants. Adjusting for
the number of passengers, cars occupy 7.8 times the road space of buses, consume 4.5 times more energy
(fuel), emit 11.5 times more pollutants and generate 2.7 times greater accident-related costs.
Buses: safer, cheaper, cleaner
Consumption of space, time and energy for car, bus and motorcycle*

Bus

Car

Motorcycle

20
18
16
14
12
10
8
6
4
2
0

Road (space)

Pollution (mass)

Energy (quantity)

Road accident (cost)

*Relative impact on consumption per person-km in Brazilian cities (Bus transport = 1)
Source: ANTP (National Association of Public Transport)

Prerequisites for modifying transport modality use patterns

“In the
competition for
space, automobiles
must lose priority.”
Ailton Brasiliense Pires,
president ANTP

8

“Everyone can have a car. But it is not sustainable for cars to be the only way to get around comfortably
and quickly. In the competition for space, automobiles must lose priority,” says Ailton Brasiliense Pires,
president of the ANTP and former president of Denatran (National Traffic Department, a federal agency).
For Joubert Fortes Filho, president of ANPTrilhos and director of Rio Metro, restricting access “is a trend
for this decade, but not possible today. First we have to increase the capacity of public transport systems
and only then implement restrictions on private transport.”
A consensus is building for restricting car use in large Brazilian cities. Measures such as those adopted
in London—including congestion pricing—aim to reduce traffic and even to raise money to improve public
transport. Half-measures and those that do not effectively address broad systemic problems often have
limited efficacy, however. In 1997, São Paulo adopted the “rodízio municipal de veículos”, which, each
day, bars 20% of the fleet from the central region during peak hours. Its success was short-lived: traffic
congestion today is already worse than before the restriction was imposed.
If building more roads is not a solution to car congestion (since often it merely increases demand), this

does not mean that highway construction is always inappropriate. Road freight contributes significantly
to traffic congestion, and is both victim and villain. The scarcity and poor quality of cargo rail systems
and under-utilisation of waterways mean that trucks carry more than 60% of Brazil’s freight. Not only
are highways inadequate (25% of Brazil’s highways were considered poor or very poor in 2010 by the
National Confederation of Transport), there is little infrastructure to cross or bypass urban centres.
Trucks waste hours in traffic, freight costs increase and urban congestion swells. Commerce and economic
competitiveness are burdened.
Ring roads that divert traffic from urban areas are a powerful solution. São Paulo’s western and
southern portions of the Rodoanel were built in the past decade. Completion of the southern section in
2010 helped to reduce afternoon peak traffic congestion by 21%. But the eastern and northern portions
are expected to be completed only in 2014, after years of delay.
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Making up for lost time
Public transport in Brazil’s metropolitan areas

Weighing up the options

I

nformed investment decisions are needed now to prepare for the future. Among the many options for
public transport, the top three solutions for medium- or high-capacity urban systems are BRT, light
rail/monorail and subway. Each of these has advantages and disadvantages. Success in implementing
such infrastructure requires a balance of strategies for the short, medium and long term that consider the
cost of both building and operating the systems.

Subways: are they worth the cost?
From an efficiency perspective, the underground subway is the most desirable system. With capacity
to transport more than 60,000 users per hour, it is not disrupted by deteriorating urban road transit,

it is “clean” (or less-polluting) and its positive image can attract new users. But subways are also the
most time-consuming and expensive system to build. After design completion and permit approval, an
underground line in Brazil takes at least four years to build.

Subway construction costs vary widely
Subways designed, under construction or completed in the US and Canada
City

Status

New York
Boston
Toronto
Los Angeles
Toronto
Vancouver
Montreal
Montreal
Montreal
Washington
Toronto
Montreal
Chicago
Vancouver
Chicago
Chicago
Boston

Under construction
Proposal

Proposal
Proposal
Under construction
Proposal
Proposal
Proposal
Proposal
Under construction
Completed
Completed
Proposal
Completed
Proposal
Proposal
Proposal

Extension (km)
3.7
0.6
6.8
20.0
8.6
12.0
1.0
2.2
5.1
18.6
6.4
5.2
3.6

19.1
8.5
2.6
7.2

Cost per km
(U$ million)
1,700
478
353
311
302
233
170
155
152
148
146
143
126
108
105
103
85

Type
Underground
Underground
Underground
Underground

Underground
Underground
Underground
Underground
Underground
Surface
Underground
Underground
Surface
Mixed
Surface
Surface
Surface/High way

Source: Fipe (Economic Research Institute Foundation)

9

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Making up for lost time
Public transport in Brazil’s metropolitan areas

In addition, costs have risen significantly recently. While the international reference used for
these projects was US$100m per km until the mid-2000s, spending varies dramatically depending on
the characteristics of the system. Additional costs include land rights acquisition and environmental
requirements. A study by Fipe (Economic Research Institute Foundation, University of São Paulo) found
that the cost of building subways in the US and Canada varies from US$85m per km to an extreme and
peculiar case of US$1.7bn per km (2nd Ave subway, in New York). In São Paulo, construction costs

surpass US$200m per km. According to Jurandir Fernandes, São Paulo state’s secretary for metropolitan
transport, several factors have raised the cost of building subways in recent years, including higher taxes,
requirements for access, insurance and environmental compensation (including aid to poor communities
that have to be relocated).

“It is necessary
to have an
integrated set of
transport modes.
We can’t wait 30
years until the
subway network is
complete.”

Light rail versus Bus Rapid Transit

Carlos Henrique Ribeiro de
Carvalho, researcher in urban
transport at Ipea

“We should do away with the idea that there is a single solution, that building a subway is the only way to
go,” says Carlos Henrique Ribeiro de Carvalho, researcher in urban transport at Ipea. “It is necessary to
have an integrated set of transport modes. We can’t wait 30 years until the subway network is complete.”
“Subways must be built only if the demand is really very high,” adds Mr Pires. “If not, it is a waste of
public money.” He argues, for example, that cities can be cost-effective in increasing the supply of rail
transport by investing in suburban commuter trains, implementing technological improvements and
reducing waiting time on the platform. In São Paulo, CPTM (the state’s public company of metropolitan
trains) has 260 km of track, some of which is of good quality, that can be optimised.
Other types of transport are being added to the mix. Trams (light-rail trains) and monorails are being
implemented in connection with the 2014 football World Cup. Among their advantages is cost: São Paulo’s

monorail Line 18 (an elevated train) cost an estimated US$100m per km, one-half the price of a subway in
the city. Speed of deployment is another advantage.
However, many experts are sceptical about the projected capacity of these options. Light rails can
usually carry around 20,000 passengers per hour. In Brazil, plans call for some monorails to carry more
than 40,000 per hour, although experts doubt the feasibility of such loads.
BRTs, pioneered in Curitiba in the 1970s, are another option. They are faster and more comfortable
than conventional buses. They require much less investment than rail systems (between US$10m and

Curitiba’s BRT pays for itself
Comparative operating costs of Brazil’s public transport systems
Mode

City

Revenues

Expenses

Net

Subway

São Paulo

Subway

Passengers/ Km/Year
Year

Cost/Km

Cost/
Passenger

923.7

1,241.2

-317.5

401.6

Porto Alegre

52.9

134.4

-81.5

Subway

Belo Horizonte

50.7

92.2

-41.5

Subway

Average

BRT

Curitiba

Loss/
Surplus per
passenger

99.5

12.47

3.09

-0.79

30.2

11.5

11.69

4.45

-2.70

28.2

2.3

40.09

3.27

-1.47

3.19
244.8

77.3

167.5

111.0

10.3

7.48

0.69

1.51

Source: Jaime Lerner, based on 2007 ANTP data.

10

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Making up for lost time
Public transport in Brazil’s metropolitan areas

A bus that looks like a subway
Inspired by the bus lanes implemented in Curitiba in the 1970s, other
cities in Latin America have built BRTs (Bus Rapid Transit), including
Bogotá, Mexico City and Santiago. Bogotá’s TransMilenio has become
a global reference point. It demonstrates that high-volume transport
infrastructure need not be expensive or time-consuming to build and
that a bus system can be as high-quality as a subway.
TransMilenio passengers pay at stations before boarding
articulated high-quality vehicles, the largest of which is 27 ft wide,
has seven gates and capacity for 260 people. While buses must still
adhere to traffic lights and pedestrian crossings, the BRT operates
in dedicated lanes in the centre of the major wide arterial roads of
Bogotá, segregated from the rest of the traffic. Two dedicated lanes
on major truck routes create an express service.
The project was part of a new concept for Bogotá that promotes
bicycle schemes, pedestrian and public space improvements and
restrictions on personal vehicles. The first phase was implemented
in just three years (1999-2002) at a cost of around US$10m per km,
one-tenth of the estimated cost of a subway line at that time.
TransMilenio demonstrates that a bus system can accommodate
extremely high volumes of passengers (up to 40,000 per hour), while

providing fast trips in a large metropolitan region. Average speed in

the 84 km-long bus system was 27 kph in July 2011. São Paulo’s buses
in exclusive lanes average a mere 15 kph.
Implementation has not been seamless. Problems have included
overcrowding and delays in the network’s expansion. Nevertheless,
research conducted in May 2011 showed that 75-80% of users are
satisfied with the TransMilenio stations and buses.

US$50m per km), can be deployed rapidly and have a capacity similar to that of monorails. But for all the
success of BRTs in Curitiba, Bogotá and Seoul (see sidebars), they may be difficult to implement in the
already cramped streets of Brazil’s many older city centres.

“Integration is
a way to avoid a
public transport
crisis, stimulate
rational car use
and relieve traffic
in downtown
areas.”
Jaime Waisman, professor
of transport engineering at
the University of São Paulo
(USP).

11

Multimodal transport systems
Multimodal combinations can reduce travel times and ensure more efficient use of the roadway network.
For example, creating parking lots and bicycle racks at metro stations and bus terminals can encourage
the use of public transport.

“This integration is a way to avoid a public transport crisis, stimulate rational car use and relieve traffic
in downtown areas,” says Jaime Waisman, professor of transport engineering at the University of São
Paulo (USP). Each mode plays a role. Buses and cars are most effective outside the city centre; trains and
subways can access denser regions.
Successful international multimodal efforts include “park and ride” programmes. Drivers park at a
station or arrive by local bus, then continue the journey by subway or train. Although rare in Brazil, São
Paulo is encouraging this system. The user purchases a card, pays a below-market price for parking (about
U$6 for 12 hours, equivalent to one hour downtown) and receives a round-trip subway ticket. While high
land prices near subway lines have to date limited adoption of this model, garages are planned for future
© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

rail stations near major highways, such as Bandeirantes, Regis Bittencourt and Dutra.
A study conducted by the Polytechnic School of USP estimated that more than 17,000 people in São
Paulo are already using “park and rides” to go to work. It suggests that there is an immediate potential to
double this demand.
Regardless of the mode of transport, intelligent systems can increase the speed and attractiveness
of public transport. In 2010 buses in 71% of Brazilian cities with more than 100,000 inhabitants used
smart cards, speeding up boarding and improving safety. Lack of agreement among bus companies and
governments, however, limits the use of smart cards across modes of transport. Unless the interests of
multiple stakeholders are aligned, urban transport will not reap the full benefits of innovative technologies.

The role of technology in raising efficiency
It is not enough to build a transport system: to make economic sense it must also be operated efficiently.
Subways are usually more expensive to maintain, but costs vary widely. For each mode of transport,
costs reflect an array of variables such as the number of passengers, the quality of service and station
maintenance. Indirect costs, such as pollution, accidents and the need to maintain public roads, should

also be factored in.

Seoul: integrated transport strategies
Seoul’s metropolitan area is as crowded as São Paulo’s, with more
than 20m inhabitants. Both cities opened their first subway line in
1974. But the transport infrastructures of the two cities are now at
completely different stages. While the São Paulo subway extends a
total of 74 km, that in Seoul extends over 300 km.
In Seoul, the subway is one part of an extensive and
co-ordinated transport system comprised of BRT (Bus
Rapid Transit), a reorganised bus system, an integrated
fare structure for buses and subways, restrictions
on personal vehicle use, encouragement of cycle,
pedestrian and public transport use, and congestion
pricing.
To alleviate funding problems, the federal
government decided to subsidise part of the
construction. In 2009 the 25-km Line 9 was opened.
Built in less than four years, it is the first privately
operated subway in South Korea.
Seoul is an international model because of its
integrated transport strategy, implemented as a result
of a wide range of improvements to public transport

12

introduced by the government in 2004. While the 1988 Seoul Olympic
Games and the 2002 Korea-Japan World Cup may have boosted
investments, they were not the system’s primary drivers.
Overall, the system has been a success. In the early 2000s, 77% of

trips were made by subway or bus, representing an increase of 11%
on the previous decade, according to a report by Professor Kang-Won
Lim of Seoul National University.

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

São Paulo’s subway network is used so intensively that operators have been able to keep fares
slightly lower than those for buses (R2.90 per journey compared with R3 for a bus ride). Subways in São
Paulo have the added advantage of better quality. As the network grows, however, operating costs per
passenger may rise as intensity of use per kilometre falls.
New technologies can reduce spending on salaries and energy, the main line items in a subway’s cost
ledger. Automation, including driverless trains as implemented on São Paulo’s Line 4, can help to lower
costs in the short term.
Cities such as Rio de Janeiro, Belo Horizonte and São Paulo have already deployed or are testing
intelligent systems on their bus fleets. GPS systems allow satellite monitoring that can identify
bottlenecks, track the location of each vehicle and make it possible to keep passengers informed through
the internet or electronic panels. Reliability remains an issue, however, as congestion and traffic lights
interfere with travel time estimates.

13

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

Getting the right balance of private
participation in public transport investment

R

“We are inundated
by the private
sector interested in
funding projects.”
Jurandir Fernandes, São
Paulo state’s secretary for
metropolitan transport

14

egardless of the solution chosen, resolving congested urban transport is costly, and public transport
is just one of the many priorities clamouring for scarce public resources. Private participation is
emerging as an alternative means of financing Brazil’s rapid mass transit development.
The implementation in 2004 of the “PPP Law” created the legal framework for promoting public-private
partnership investments in infrastructure. The first PPP project in Brazil was signed in 2006 and operates
Line 4 of the São Paulo Metro. ViaQuatro, concessionaire of the CCR Group (in which construction giants
Camargo Corrêa and Andrade Gutierrez, are shareholders) financed the trains and signalling systems
(28% of the total cost) in exchange for operating the subway line for 30 years. The government financed
the remaining 72%.
The São Paulo state government now plans to expand this model to other subway lines. Besides raising
funds for PPP projects, in mid-2011 the government for the first time allowed companies to submit
proposals for PPPs rather than waiting for projects to be developed by the public sector.
“We are inundated by the private sector interested in funding projects,” says Mr Fernandes. He
estimates that private capital may be willing to provide up to 80% of the total investment in a subway

line. This is possible because “there is now a consolidated regulatory framework [and] contracts are being
respected”, according to Luis Valença, president of ViaQuatro. The institutional credibility of the PPP
model is important to attract potential investors.
“Besides providing additional resources to build subways, private sector efficiency means gains
in speed of construction,” notes Mr Fernandes. The private sector also has the advantage of greater
flexibility, according to Mr Valença. He believes that projects carried out by the state will always cost more
and take longer, not least because of additional oversight requirements involving expenditure of public
resources.
Private participation can also enable innovative technologies not available in strictly public projects.
Driverless subways, which were first adopted in Brazil with Line 4, are an example. “The private sector’s
profit depends on efficiency and the risks it takes on. The adoption of new technologies is an efficiency
gain,” explains Mr Valença.

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

“Private
investment is
important to
complement
public funding but
cannot be seen as
the only solution.
Plans cannot be
dictated by private
interests, but by
the public wellbeing.”

Claudio de Senna Frederico,
international consultant

Preserving the public interest
Bottlenecks are not the purview only of public projects. Political interference, lengthy environmental
licensing processes, expropriation of property and the bidding process for a PPP, which is usually the
target of protests and court battles, can affect any project.
“Private investment is important to complement public funding but cannot be seen as the only
solution. Plans cannot be dictated by private interests, but by the public well-being. You cannot simply
prioritise the more expensive and more profitable investments,” says Claudio de Senna Frederico, an
international consultant and the Brazilian representative in the UITP (International Association of Public
Transport), which analysed the outlook for global public transport to 2020. He adds that public transport
is a social priority and therefore requires direct subsidies from governments, including for operating
systems.
Mr de Carvalho, from Ipea, has a similar point of view. “The risk of leaving all costs and controls to the
private sector is that it will create a system that is so expensive it will encumber user fares,” he says.
An Ipea study of public transport in European cities found that to maintain socially appropriate fares,
governments subsidise much of the operational costs. In London, the subsidy represents 49% of the total
cost, in Madrid 57%, and in Paris 61%. In Brazil, with few exceptions, all costs tend to be included directly
in the fare.

Public transport is subsidised in Europe

Amsterdam
Barcelona
Berlin
Brussels
Budapest
London
Madrid

Paris
Vienna

Annual costs
(US$m)
454
979
1,775
566
636
4,433
1,742
7,000
62

Revenues
(US$m)
174
547
931
174
234
2,252
745
2,763
24

Subsidies
(US$m)
281

432
841
392
403
2,181
998
4,237
39

Subsidies
as % of cost
62
44
47
69
63
49
57
61
62

Source: European Metropolitan Transport Authorities (EMTA) 2009.

15

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

Conclusion

U

nless the use of personal vehicles is restricted in Brazil’s mega-cities, urban centres and their
business, commercial and industrial districts will become increasingly gridlocked. Urban traffic
congestion is reaching levels that introduce significant barriers to the long-term growth of urban areas.
Such barriers are a considerable burden on national, regional and local competitiveness, and the quality
of life of all that are subject to it. Multiple private and public stakeholders often present hurdles to
adoption of seamless integration systems, from ticketing to scheduling.
Meeting these challenges will require a comprehensive approach that incorporates an understanding
of current needs, likely future trends and flexibility to adapt as future technological, economic and social
opportunities and needs arise. Success depends on building a consensus among the many interests that
are affected by a decision to reduce substantially the economic costs of existing transport systems.
Initiatives should:
Sharply increase investments in a diverse transport infrastructure. Between 2006 and 2009, Brazil
invested 2.1% of GDP per year in infrastructure (including transport), according to a report from BNDES.
A World Bank study estimated that Brazil should invest more than 4% of GDP per year. To approach the
standards of industrialised countries of Asia, up to 9% is needed. Commitments on such a scale require
national vision and action to avoid waste and slippage.
Move to restrict car use. A new focus on congestion requires new priorities for public transport in order
to improve efficiency and reduce costs. To succeed, governments must be willing to discuss unpopular
measures to stimulate more rational personal vehicle use, including restrictions such as congestion
pricing, high parking costs in city centres and dedicated bus lanes.
Focus on multi-faceted approaches. There is no single solution for urban transport problems. Success
in tilting the scale towards public transport solutions requires a balance of strategies that address the
short-, medium- and long-term needs of both the public and the government and ensure an ongoing
maintenance plan. Nationally, the challenge is to enable development and building of projects that are
most appropriate for each region and time.

16

© Economist Intelligence Unit Limited 2011


Making up for lost time
Public transport in Brazil’s metropolitan areas

Reduce bureaucratic barriers and introduce fast-track approval of environmentally sustainable
projects. Current slow bidding processes, dispute resolution and long licensing periods increase costs and
the time required to transform transport patterns in major cities. Possible solutions include encouraging
expedited dispute resolution and improved regulations that enable projects considered sustainable (less
polluting and for mass transport) to be given priority in environmental permitting.
Balance public and private funding. PPPs are playing an important role in funding infrastructure
projects, and state governments have stepped up their contributions as well. In São Paulo, rail system
construction is expected to accelerate from the recent average of 2 km per year to 7 km. However, experts
believe that the challenge will be to maintain the current levels of investment at the state level without
direct funding from the federal government.
Such measures to improve Brazil’s public transportation systems provide exciting opportunities
at both the national and company level. Investments in infrastructure projects will create jobs and
help sustain economic growth in a time of worldwide uncertainty. The elimination of one of the major
bottlenecks to economic activity in Brazil’s mega-cities will only strengthen the country’s global
competitive position.

17

© Economist Intelligence Unit Limited 2011

Cover image: AFP/Getty Images

18

Whilst every effort has been taken to verify the accuracy
of this information, neither The Economist Intelligence
Unit Ltd. nor the sponsors of this report can accept any
responsibility or liability for reliance by any person on
this white paper or any of the information, opinions or
conclusions set out in the white paper.


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