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Reforming the Urban Transport Sector in the Rio De Janeiro Metropolitan Region _LP5 - a n L POLIcy RESEARCH WORKING PAPER 2096 Reforming the Urban In a bold effort to privatizeRio de Janeiro's urban transport Transport Sectorin the sector,the stategcvernment d J M etr p ot' showedthat political RiO decisiveness,transparency, lReg;on and ingenuityin developing incentivesare crucial to make loss-makingoperations A Case Study in Concessions attractiveto the privatesector. It also learned that not having Jorge M. Rebelo a credible staff redundancy program might seriously undermine the benefits expected from concessions. The World Bank Latin America and the Caribbean Region Finance, Private Sector, and Infrastructure Department Transport and Urban Unit April 1999 POLICYRFSEARCH WORKING PAPER 2096 Summary findings Rebelo describes a bold effort by the state governtnent to 'The Rio de Janeiro Mass Transit Loan, which increase private sector participation in Rio de Janeiro's supported the reorganization of the sector and the urban transport sector, reduce heavy operating subsidies, concession of the Rio suburban railways (Flumitrens). and establish a foundation for making the sector Most of the reforms in the urban transport sector have sustainable. been implemented. This effort was undertaken with the help of three The lessons learned from implementation and the World Bank-financed loans: results obtained so far suggest that political decisiveness, The Rio de Janeiro Metropolitan Transport loan, transparency, and ingenuity in developing incentives are which provided assistance for the transfer of federally crucial to privatizing urban rail transport systems. owned suburban railways to the state government. But the state also learned that not having a credible The Rio de Janeiro State Reform and Privatization staff redundancy program might seriously reduce the Loan, which helped the state privatize and grant benefits expected from concessions. concessions for a number of its enterprises. This paper -a product of the Transport and Urban Unit, Finance, Private Sector, and Infrastructure Department, Latin America and the Caribbean Region -is part of a larger effort in the region to help borrowers concession loss-making urban transport operations to the private sector. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Allison Turner, room 15-005, telephone 202-473-0933, fax 202-676-9594, Internet address aturneraworldbank.org. Policy Research Working Papers are also posted on the Web at hrrp:/! www.worldbank.org/html/dec/Publications/Workpapers/home.htmi. The author may be contacted at jrebeloCcworldbank.org. April 1999. (24 pages) The Policy Research Working Paper Series disseminates the findings of work in progress to enicourage the exchange of ideas abont development issues.An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. T-he papers carry the names of the authors and should he cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Produced by the Policy Research Dissemination Center Reforming the Urban Transport Sector in the Rio de Janeiro Metropolitan Region A Case Study in Concessions Jorge M. Rebelo Reforming the Urban Transport Sector in the Rio de Janeiro Metropolitan Region: A Case Study on Concessions Jorge M. Rebelol This paper describes a bold effort by the Rio de Janeiro State Government to increase private sector participation, reduce operating subsidies and set the foundations for long-term sustainability of its urban transport sector. This effort was undertaken with the help of three World Bank-financed loans: The Rio de Janeiro Metropolitan Transport Decentralization loan, which assisted in the transfer offederally-owned suburban railways to the State Government; the Rio de Janeiro State Reform and Privatization loan, which assisted the State in the privatization and concessioning of a number of its enterprises; and the Rio de Janeiro Mass Transit loan, which supported the reorganization of the sector and the concession of the Rio suburban raihvays (Flumitrens). Most of the urban transport sector reforms have been implemented The lessons learned from the implementation process adopted by the State as well as the results obtained so far suggest that political decisiveness, transparency, and ingenuity in devising incentives are key to privatizing urban rail transport systems. But they also show that not having a credible staff redundancy program may seriously reduce the benefits expectedfrom the concessions. URBAN TRANSIT PROBLEMS IN THE RIO DE JANEIRO METROPOLITAN REGION 1. The Rio de Janeiro Metropolitan Region (RJMR) comprises 546,865 hectares and 9.8 million inhabitants, spread irregularly over 19 separate municipalities. It is dominated by the Rio de Janeiro municipality, with 5.7 million inhabitants. Within the metropolitan region roughly 76 percent of the population lives on just 15 percent of the territory. 2. The Rio de Janeiro municipality alone accounts for 56 percent of the population of the State and 77 percent of the income of the metropolitan area. It employs 4.5 million people and generates roughly 85 percent of the city's income. Buses and Cars Account for Too Large a Proportion of Total Trips Made 3. Every day 13 million person trips are made in the metropolitan region, of which 40 percent are home-to-work commutes. Sixty-seven percent of all trips are by public transport, 11 percent are by automobile, 20 percent are by foot, and 2 percent are by Mr. Rebelois a Principal Transport Specialistin the Finance, Private Sectorand Infrastructure Department of the Latin AmericaRegion of the WorldBank. He is TeamLeader for urban transport projects in Brazil. The authoris thankfl to Mr. Murilo Junqueira,ex-Managing Director of Flumitrens and Ms. ReginaAmdlia Oliveira,ex- Planning Coordinatorof Flumitrensfor some of the data provided. other modes. Of the 8.7 milliontrips a year made on public transportation,77 percent are by bus (most of whichare run by private operators), 14.5percent by automobile, 4 percent by suburbantrain (Flumitrens,formerly CBTU-RJ), 3 percent by subway (Metro), 1 percentby ferry (CONERJ),and 0.5 percentby other modes.About half of all publictransport trips involvetransfers (47 percent of all train trips, 41 percent of all bus trips, and 37 percentof all Metro trips). 4. Lack of integrationbetween the 23-kilometerlong Metro and the 264-kilometerrail network discouragesmore rail trips. As a result,buses and automobileare used, creating heavycongestion during peak hours and significantlyincreasing commuting time. It is estimatedthat each carioca (inhabitantof Rio) wastes 10-15days a year becauseof hightraffic congestion. 5. The problemis exacerbatedby Rio's many hillsand tunnels,which makeit vulnerable to traffic congestion,especially when accidentsoccur or cars break down. The fact that there is limited spacefor fullysegregated busways also contributesto bus congestion. Poor People Bear a DisproportionateShare of the Burden of InadequateMass Transit 6. The main users of the publictransport systemare from the BaixadaFluminense, one of the lowest-incomeareas of the RJMR. Theseusers sufferfrom a shortageof capacityat peak hours that causes severeovercrowding (more than 10 passengersper square kilometer).They spend more than a fourth of their personalincome on transit fares and endure long commutes(2.5-4 hours a day)that often requiremultiple transfers. ExcessiveCongestion Adversely Affects the Environment 7. In 1994, 1.7 millionvehicles were registeredin the Rio de Janeirometropolitan region. Thesevehicles have degradedthe city's air qualityby increasingthe levels of carbon monoxide,ozone, and particulatematter. The problemis particularlyacute in tunnels, which are poorly ventilated.Although vehicular air pollutionhas been somewhat mitigatedby the use of by use of alcoholthe problemremains severe. Vehicular accidentshave become a major source of environmentalrisk in Rio de Janeiro. Congestionand overcrowdingof the publictransport system also contributeto environmentalstress, prompting trampling and fights. 8. Lack of coordinationbetween the three levelsof governmentresponsible for urban transport, particularlybetween the State and the municipalityof Rio de Janeiro,led to poor tariff and modalintegration, lack of prioritizationin urban transportinvestments, and the absenceof a commonpolicy on pricing and subsidies.With the exceptionof one state-ownedcompany (CTC), in 1995-96all bus serviceswere providedby private operators,which do not receivedirect subsidies.In contrast,Flumitrens received US$180 millionin subsidies,Metro US$109 million,and CONERJUS$30 millionin 1995 (at the start of the reform program). 2 INSTrrUTIONAL FRAMEWORK 9. Urban transport responsibilitieswithin a municipalityfall under the jurisdictionof the municipality'sprefeitura (mayor's office).Metropolitan transport (in most cases, urban transportinvolving more than one municipality) is under the jurisdictionof the state. The State Secretaryof Transport (SECTRAN)oversees Flumitrens (suburban rail), Metro (subway),CTC/SERVE (bus), CONERJ(ferries), and CODERTE (terminals),all of which are owned by the State. Table 1 summarizesthe basic data for these state-ownedcompanies in 1995,i.e., at the start of the reforms;and Annex 1 describeseach of them in more detail.Urban transport in the
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