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 Preface Introduction: congestion and its costs Why cars can’t be the answer Weighing up the options 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 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 © 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 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 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 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 © 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) Populatiom, m 17 700 600 13 500 20 London Shanghai New York Beijing 15 Moscow 12 Madrid 21 Paris Hong Kong 16 Berlin 100 Santiago 200 19 São Paulo 300 Mexico City 400 Source: Office of the UITP (International Association of Public Transport) in Brazil February 2010 report from BNDES (the government-owned National Development Bank) Reports prepared by BNDES’s Area of Economic Research not necessarily reflect the thinking of the bank’s management 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 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 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 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) © 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 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 “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 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 © Economist Intelligence Unit Limited 2011 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) © Economist Intelligence Unit Limited 2011 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 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 © Economist Intelligence Unit Limited 2011 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 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 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 km per year to 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 LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com NEW YORK 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]... 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... data 10 © Economist Intelligence Unit Limited 2011 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... 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... 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... 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... 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... 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... 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. . .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... 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 ... 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: ... 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... Intelligence Unit Limited 2011 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