World Bank Document

----:-.: . ; . Document of The World Bank

FOR OFFICIAL USE ONLY -~~~~~~~ -<2z3-6/4 Public Disclosure Authorized Report No. 5505-BR Public Disclosure Authorized

STAFF APPRAISAL REPORT

BRAZIL

FEDERALRAILWAY - EXPORT CORRIDOR - PROJECT Public Disclosure Authorized

May 7, 1985 Public Disclosure Authorized

Projects Department Latin American and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Currency Unit - Brazilian Cruzeiro (Cr$)

Official Rate US$1.0 - Cr$ 4,850 (April 30, 1985) The March 1985 average exchange rate (US$1.0 - Cr$ 4,162) was used throughout the report unless otherwise indicated

Fiscal Year January 1 - December 31

Weights and Measurements Metric: British/US Equivalent

1 meter (m) = 3.28 feet (ft) 1 kilometer (km) - 0.62 mile (ml) 1 kilogram (kg) - 2.20 pounds (lb) I metric ton (m ton) - 2,205 pounds 1 liter (1) - 0.26 US gallon (gal)

Abbreviations and Acronyms AGEF Armazens Gerais Ferroviarios S.A. Railway's General Warehousing Company BNDES Banco Nacional de Desenvolvimento Economico e Social National Economic and Social Development Bank CBTU Companhia BrasileLra de Trens Urbanos Brazilian Urban Train Company CFP Comissao de Financiamento da Producao Agricultural Production Financing Commission CIP Conselho Interministerial dos Precos Interministerial Committee for Price Control CrRIN Comissao do Trigo Nacional National Wheat Commission CVRD Companhia Vale do Rio Doce Rio Doce Valley Company DER Departamento de Estradas de Rodagem (Estatal) State Roads Department DNER Departamento Nacional de Estradas de Rodagem National Federal Roads Department EBTU Empresa Brasileira de Transportes Urbanos Brazilian Urban Transport Enterprise EFVM Estrada de Ferro Vitoria-Minas Vitoria-Minas Railway Company FEPASA Ferrovia Paulista, S.A. Sao Paulo Railway GEIPOT Empresa Brasileira de Planejamento de Transportes National Transport Planning Agency INPC Indice Nacional de Pregos ao Consumidor National Consumer Price Index IRK Internal Rate of Return MBR Mineragoes Brasiieiras Reunidas United Brazilian Mining Company MIS Management Information System MT Xinisterio dos Transportes Ministry of Transport OiS Operations Information System PORTOBRAS Empresa de Portos do Brasil, S.A. Brazilian Port Enterprise RFFSA Rede Ferroviar.a Federal, S.A. Federal Railway SAP Bank Special Action Program SEPLAN Secretaria de Planejamento Federal Planning Secretariat SUNAMAK Superintendencia Nacional da Marinha Mercante National Agency for Merchant Marine FOROMCUL USE ONLY

STAF APPRAISAL rKPER

BRAZIL

FEDUAL R&UMAY- WXPourco1OP - PRO]!

TABLJEaFt? !E!

PROJECT SUMMARY*...... ********* ...... (i)

I. THE TRANSPORT SECTOR 1

A_ Sectoral Context ... ,...... 1 B. Sector Management ...... ** **.. 2 C. The FederalRailway ...... *..CS***...*S 3 D. Bank Experience in the Sector ...... 4

II. THE FEDERAL BAILWAY ...... 5

A. RFFSA's Organization and Finances ...... 5 B. The Economic Role of the Railway ...... 7 C. The Rationalization of Operations and Network ...... 9 D. Costs and Tariffs, Marketing and Cost Control ...... 10 E. Operations and Maintenance ...... b e****** 12 (i) Operating Performance *...*..* ...... 12 (ii) Operations Management* ...... 13 (iii) Motive Power, Rolling Stock and Workshops ...... 14 (iv) Track Maintenance.. **....**...... ** 15 F. Investment ...... ******************** ...... 16 G. Planning and Management, Training ...... 17

SIlI THE PROJECT ...... 18

A. Project Objectives and Rationale ...... 18 B. Project Description ...... 19 (i) The Policy and Institutional Development Action Plan 19 (ii) The Export Corridor Projects ...... 22 C. Project Implementation ..o ...... 23 D. Project Cost and Financing ...... 23 E. Procuremnent ...... 24 F. Disbursements ...... ****...*.. *...... 25 G. Accounts and Audits * ...... 26

This report is based on the findings of preparatory and appraisal missions which visited Brazil in 1984 comprising Messrs. J. Cellier (Transport Economist), J. Baigorria (Railway Engineer), and T. Markus (Financial Analyst). The missions were assisted by Messrs. N. Tcheyan (Loan Officer), K. Viswanathan (Railway Engineer), S. Spencer (Railway Management Consultant), W. Thompson (Operations Systems Consultant), IL Carruthers (Costing and Tariff Consultant), M. Prehn (Railway Operations Consultant), and D. Burns (Traction and Rolling Stock Consultant). The report has been edited by Ms. Virginia R. Foster.

This document has a rtricd distnbution and may be used by repieats only in the performanceof their ofic duties Its contents may not otherwise be dicosed without Wodd Bank autborizatios. - li - TABLE OF CONTENTS (continued) Page No.

IV. RFFSA's FINANCIAL PROJECTIONS *...... 09...... 26

V. ECONOKIC EVALUATION 29

A. General 29 B. Traffic ...... se. 30 C. Benefits ...... 31 D. Risks and Sensitivity Analysis ...... 32

VI. AGREENENTS REACHED AND RECOMMENDATION ...... 33

TABLES

1.1 Federal Investments in the Transport Sector, 1976-1984 ...... 35 1.2 Petroleum Automotive Fuels: Price Structure and Adjustment .. 36 2.1 RFFSA's Past and Projected Traffic, 1970-1990 ...... 37 2.2 Summary of RFFSA's Costs and Tariffs, and Truck Tariffs, 1984 38 2.3 RFFSA's Operating Statistics, 1979-1983...... 39 2.4 RFFSA's Diesel Motive Power, 1984 ...... 41 2.5 Estimates of Life Cycle Costs of Remanufactured vs. New Locomotive ...... 42 2.6 Summary of RFFSA's Diesel Locomotive Requirements, 1985-1989. 43 2.7 RFFSA's Rolling Stock, 1984 44 2.8 Su_mary of RFFSA's Freight Wagon Requirements, 1985-1989 .... 45 2.9 RFFSA's Investments, 1980-1984 46 2.10 RFFSA's Investment Plan, 1985-1989 ...... 47 2.11 RFFSA's Investment Financing Plan, 1985-1989 48

3.1 RFFSA's Operational and Financial Targets, 1985-1989 *@SeS**S 49 3.2 Project Cost Summary ...... 50 3.3 Policy and Institutional Development - Cost Table ...... 51 3.4 Goias-Minas Gerais Corridor - Cost Table ...... 52 3.5 Parana Corridor - Cost Table ...... 53 3.6 Project Financing Plan *...... 54 3.7 Policy and Institutional Development - Financing Table ...... 55 3.8 Goias-Minas Gerais Corridor - Financing Table ...... 6...... 6 56 3.9 Parana Corridor - Financing Table ...... 57 3.10 Estimated Schedule of Disbursements ...... 58 4.1 RFFSA's Income Statements, 1979-1989 ...... 59 4.2 RFFSA's Average Working Costs per Traffic Units, 1979-1989 60 4.3 RFFSA's Projected Fund Flow Statements, 1985-1989 ...... 61 4.4 RFFSA's Balance Sheets, 1979-1983 ...... 62 4.5 RFFSA's Projected Balance Sheets, 1984-i989 ...... 63

ANNEXES

1. Bank Assistance in the Transport Sector 64 2. RFFSA's Freight Traffic Forecasts 69 3. Design Features of the Two Corridor Projects 75 4. Financial Forecast Assumptions 84

5. Economic Evaluation of the Two Corridor Projects CSS*SSCOSS@@ 86 6. Selected Documents and Data Available in the Project File 92 - iii - TABLE OF CONTENTS (continued)

Page No. CHARTS

26226 Organization of the Ministry of Transport ...... 94 27150 Organization of the Federal Railway (RFFSA) ...... 95 27093 Project Implementation Schedule ...... 96

MAPS

IRRD 18760 - BRAZIL - Railroads IBRD 18761 - BRAZIL - Goias-Manas Gerais Corridor IBRD 18762 - BRA2IL - Parana Corridor BRAZIL

FEEAL RAUAMh- EXPORT CORRIDOI- PROJECT

Borrower: Rede Ferroviaria Federal S.A. (RFFSA)

Guarantor: Federative Republic of Brazil

Amount: US$200 million

Terms: Repayment in 15 years, including three years of grace, at standard variable interest rate.

Project The project would provide assistance to RFFSA in the implementation Description: of (i) a set of action plans and programs aimed at its financial rehabilitation and at improving its commercial performance,and (ii) two rehabilitationand improvement projects designed to increase transport efficiency in the Parana and Goias-Minas Gerais export corridors. The policy and institutional development component includes action plans for rationalizing the railway's operations and network; upgrading tariffs, marketing and cost control; improving operations and maintenance efficiency; strengthening planning and management systems; and improving transport coordination in the Southeast corridors. The two corridor projects essentially include the rehabilitation and improvement of the most critical sections of main lines, of yards, of workshops and of intermodal facilities.

Beneficiaries: Quantifiable project benefits would be realized by RFFSA in the form of cost savings on train and yard operations and on track maintenance, and, because of the competition with the trucking industry, to a large extent they would have to be passed over to the users. Substantial benefits would accrue, in particular, to agriculture and export producers in the areas of influence of the two corridors. The action plan component would support the Government and RFFSA's management efforts to turn the federal railway into a financially and commercially viable freight carrier.

Risks: Project benefits could be affected by lower-than-expected economic performance, particularly export performance in the regions served by the two corridors, and by unexpected delays in the project's implementation. The project, however, would still have an attractive rate of return. An appropriate project monitoring system would be established to minimize the risks. (ii)

Estimated Costs: 1/ - -US$ Million Local Foreign Total

Railway Policy and Institutional Development Component 3.4 2.6 6.0 Goias-Minas Gerais Corridor Ccaponent 64.8 77.4 142.2 Parana Corridor Component 81.8 86.0 167.8

Total Base Cost 150.0 166.0 316.0

Physical Contingencies 12.3 12.1 24.4 Price Contingencies 39.9 41.7 81.6

Total Project Cost 202.2 219.8 422.0

Total Financing Required 202.2 219.8 422.0

Financing Plan - -US$ Million--- Local Foreign Total

IBRD 22.1 177.9 200.0 BNDES 34.1 20.0 54.1 Supplier Credit - 7.6 7.6 RFFSA 105.0 13.0 118.0 Government 41.0 1.3 42.3

Total 202.2 219.8 422.0

Estimated Disbursements: -- US$ Million-

Bank FY 86 87 88 89 90 91 92

Annual: 25 2/ 25 50 60 30 8 2 Cumulative: 25 50 100 160 190 198 200

Rate of Return: About 21%, based on an evaluation of the two Corridor components which represent 98% of total project cost.

1/ Including estimated local taxes and duties totaling US$58.2 million. 2/ Including initial deposit of US$15.0 million into the Special Account. I. Us TRANSPORTSBCToI

A. Sectoral Contezt

1.01 Brazil's rapid economic growth throughout the 1960s and the 1970s, including the development of widely spread agricultural and mineral resources and the geographically concentrated industrial base, led to unprecedented increases in transport needs. The Federal Government's main objective in the transport sector has been to expand the capacity of the system in line with demand growth. Massive public sector investments have been made in the transport infrastructure, accounting for almost 20% of total public investment in the mid-1970s. Until 1973-1974, the largest share of the federal investments in transport was directed to the construction and paving of a network of primary highways. The sudden increase in petroleum prices led the Federal Government to put more emphasis upon the development of rail and water transport. Large railway investments were undertaken, in conjunction with ambitious plans for the expansion of the steel industry, at a time of favorable prospects in the iron ore and steel markets. In addition to coal and ore terminals, grain terminals were built as outlets to the main export corridors in the South and the Southeast. Considerable efforts were made to develop a national merchant marine fleet for both ocean and coastal shipping, and a domestic ship-building industry. Programs were started to increase the capacity of the suburban commuter systems in the main cities.

1.02 Transport policy in the first half of the 1980s has been shaped by the Government's austerity program. Public investments in the sector have been scaled down drastically; 'in 1984, federal investments in transport were about half their 1976 level ln real terms (Table 1.1). The completion of the "Ferrovia do Ago" railway line has been postponed; the only significant railway investment has been for the integrated Carajas iron ore project (Loan 2196-BR) of the large mining group Companhia Vale do Rio Doce (CVRD). Highway construction has been limited to the recently completed Northwest Highway (Loan 2062-BR). Port investments were geared essentially to the completion of the Sepetiba ore terminal and of two integrated industrial projects, the Tubarao steel mill and the Albras-Alunorte aluminium projects. The programs for improving commuter services in the main cities were continued, but at a slower pace. Although the emphasis gradually shifted from new construction to maintenance and to the rehabilitation of essential facilities, in particular those necessary to the country's exports and to agricultural development, the lack of resources led to the postponement of needed maintenance and rehabilitation works sectorwide.

1.03 Transport output has been growing at rates higher than GDP during the past two decades: total freight traffic increased at an average 8.5% p.a. and inter-city passenger traffic at about 13% p.a., whereas GDP grew at an average 7.5% p.a. In 1981-1983, however, GDP declined and so did freight traffic, whereas passenger traffic continued to grow, but at a mcch slower pace. In 1984, the incipient economic recovery, according to preliminary estimates, brought freight traffic back to its highest level of 1980, an increase of more than 10% over its 1983 level. Road transport is the dominant mode; it is estimated to carry about 60% of total freight and 97% of inter-city passengers. The railways have suc- ceeded in increasing their share in the freight traffic from about 17% of total ton-km in the early 1960s to about 23X in the early 1980s, increasingly specializing in fewer commodities and longer hauls. Coastal shipping, virtually stagnant for many years until 1973, then developed at an annual rate of about BZ, specializing in liquid- and dry-bulk cargoes, and Brazilian flag participation in foreign trade increased markedly. Inland water transport, although not very significant countrywide,is important in the Amazon basin and has developed recently in the Rio Grande corridor.

B. Sector Management

1.04 Public sector investments in the 1960s and 1970s were accompanied by the development of large subsectoral autonomous agencies and public enterprises under the jurisdiction of the Ministry of Transport (MT) (Chart 26226). Most regional railways were regrouped into a federal railway company (RFFSA), and into the State of Sao Paulo railway (FEPASA), with the exception of the Vitoria-Minas Gerais railway (EFVM) owned by CVRD. The National Highway Department (DNER) expanded rapidly with the construction of the federal highway network, and state highway agencies (DERs) in the more developed states also grew quickly. The port administration was reorganized with the creation of PORTOBRAS, a federally-owned holding company which controls individual port companies and agencies. The National Mer- chant Marine Superintendency(SUNAMAM), responsible for administering the shipping subsector, was also charged with monitoring large Government-supported shipbuilding programs. The Brazilian Urban Transport Corporation (EBTU) was created to manage federal investments for urban transport.

1.05 Since these entities, particularly for their investments,were funded mostly with tax revenues earmarked for specific purposes, more attention tended to be paid to the achievement of physical targets than to sound economic and financial planning. A transport planning and coordination agency (GEIPOT) was established under MT to formulate sector policies and to assist the agencies in preparing subsectoral plans and pre-investment studies. GEIPOT grew rapidly as an independent public enterprise, operating increasingly under specific-purposecon- tracts with MT and its agencies, and its role progressively became that of an out- side consultant/research institution. Neither MT nor its modal agencies, however, developed sufficient in-house planning capabilities to direct GEIPOT's work toward well defined planning objectives or to integrate GEIPOT's plans and recommendations into a continuous planning and coordinationprocess. MT needs to concen- trate more upon policy formulation and the coordination of the agencies' plans and strategies than upon specific investment and operational decisions. The modal agencies need to strengthen their in-house planning and management capabilities to develop and monitor appropriate strategic plans. The Federal Highway Sector Pro- ject (Loan 2446-BR, 1984) supports these objectives in the highway subsector; the proposed project would help to strengthen RFFSA's planning and management, as well as its management autonomy, and to support a transport coordination action program focusing upon the Southeast corridors.

1.06 Financing policies in the sector have reflected Government efforts to contain inflation through price control. The centrally controlled tariffs of the revenue-earningentities have generally been adjusted in line with inflation; still, revenues from many public transport services have remained well below costs, and the Government has had to cover substantial (although reducing) operating deficits. Central control over investments has been gradually restored with the dismantling of tax earmarking, but, at the same time, the Government's efforts to reduce public deficits have led most sector entities to rely essentially upon -3- borrowing to finance their investments. The service requirements of these borrowings have reached practically unmanageable levels for many entities, and the Government has had to assume the debt obligations. New pricing policies &re needed to restore the financial situation of the public enterprises, including their ability to generate the necessary savings to finance essential investments in the sector.

1.07 Brazil's energy strategy in the transport sector has emphasized substi- tution of domestically produced alcohol for gasoline as well as programs to relieve urban congestion through traffic management and through improvement of suburban rail systems. Although attempts to attenuate the impact of the 1979 oil price increases and of the 1983 major devaluation of the cruzeiro upon domestic prices of petroleum products resulted in temporary subsidies to consumers of diesel oil, in particular, the Government has, since late 1983, been keeping consumer prices of gasohol and diesel oil, net of local distribution costs and retailers' margins,well above borderprices (Table1.2). This strategyhas been successful im reducing gasoline consumption, but the consumption of diesel oil has continued to increase. The Government recently put more emphasis upon conserva- tion of dieseloil, throughcontinued increases In dieselprices and through programsto promoteefficiency in the road transportindustr,y; these effortsare supported by the Bank under the Federal Highway Sector Project (Loan 2446-BR). The proposedproject would also contribute to this objective, from a fuel- efficiencypoint of view, throughimproving the intermodalallocation of cargoes In the two corridors,and throughstrengthening intermodal coordination in the Southeast. 1.08 Transportpolicy in the secondhalf of the 1980sshould, in line with broaderefforts to ach.evethe necessary structural adjustment and sustain the incipienteconomic recovery, aim to improvethe performance and financesof the publicentities in the sector,as well as to supportother iaportantcountry objectives related to export expansion, agricultural growth and energy conserva- tion. In order to achievemore efficient resource use in the sector, further efforts should be made to rationalizethe operations,and to improvethe pricing and marketing policies, of the public enterprises through greater reliance upon commerciallyoriented activities, and to strengthentheir planning,management, and operations. Emphasisshould be put upon facilitatingexports, particularly by improvingoperational efficiency in the exportcorridors and in the port systems, and by ensuringadequate transport in the agriculturalregions. Publicinvestment should be focusedupon the rehabilitationand maintenanceof the essential facilities,rather than new construction,and upon cost-effectiveprojects which generate quick returns, especially foreign exchange earnings and/or savings. The Bank's strategy for the transport sector supports these objectives; its implementation would be continued with the project as well as through sector dialogue with the new Government.

C. The Federal Railway

1.09 The federalrailway company, KFFSA, was createdin 1957 as a public corporationunder the jurisdictionof the Ministryof Transport,combining 18 formerlyindependent railway companies. XFFSA operatesfreight and inter-city passengerrail serviceson a networkof about 23,000km in length,which essentially serves the more developedregions of Southeasternand SouthernBrazil, as well as part of the Northeast. RFFSA wads also responsible, until recently, for operating rail commuter services in several major cities, but responsibility for - 4 - these services was transferred, during 1984, to the newly created Brazilian Urban Train Company (CBTU) following an early 1984 Government decision to separate the socially oriented commuter operation from the rest of RFFSA (para. 2.02).

1.10 RFFSA's traffic has increased substantially over the past two decades, particularly in the bulk commodities and longer hauls for which the railway has comparative advantage over road transport. Freight traffic increased at an average 13.7% p.a. in ton-km between 1972 and 1980, then decreased by a total 10% in 1981-1983, essentially as a result of the reduced international demand for iron ore; it rose 14X in 1984, reaching about 77 million tons and 34 billion ton-km. Freight traffic is expected to continue growing in the future, although at a slower pace than in the past. Prospects are good for RFFSA, in particular as a result of the project, to improve its participation in the increasing demand for transport of export and agricultural products. RFFSA's inter-city passenger traffic has been decreasing since 1958, and it is the Government and RFFSA's objective to reduce it further by eliminating the nonremunerative services.

1.11 While RFFSA'B financial performance has been improving steadily over the past five years (the working deficits turned into a working surplus in 1983, and, by 1984, the operating deficits reduced by about 73% from 1979), the railways still have to depend upon Government subsidies to cover operating deficits, to service debts and to undertake capital investments. Although the financial improvements were somewhat exaggerated by deferring maintenance works and by the insufficient indexing of asset values, significant progress has been made in reducing the railways' work force and the nonremunerative inter-city passenger services, and, to a lesser extent, in rationalizing freight services and closing nonremunerative lines. However, because of Government control, RFFSA has not been able to adjust its tariffs beyond inflation for appropriate cost-recovery or to rationalize its freight services and network as fast as would have been desirable. Also, investment decisions were often made at the Government level, without KFFSA's priorities and capacity to invest being taken into full account; and the heavy reliance upon borrowings, together with the rapid devaluation of the cruzeiro, drove RFFSA's debt obligations to a practically unmanageable level.

1.12 Recently, the Government, through a Presidential Decree issued Decem- ber 4, 1984, assumed as capital contribution the railways' debts incurred until the end of 1984, and established a framework for the commercially oriented operation of RFFSA (para. 2.05). By virtue of these measures, which had been under discussion between the Government and the Bank for almost three years, the requirements for Bank participation in a new project with RFFSA have been complied with, and a reasonable base for the successful implementation of the project has been established. The Bank loan and project agreements would reinforce the Decree; the various action plans included in the project have been designed to support its full implementation.

D. Bank Experience in the Sector

1.13 Before the mid-1970s, the Bank's primary concern in the transport sector was to support Government efforts to expand the capacity of the system in line with demand growth. From 1968 to 1975, the Bank made five loans totaling US$376 million for highways, three loans totaling US$296 million for railways, and one loan of US$45 million to help finance the construction of a container terminal at the Santos port. Through these projects, the Bank contributed particularly to the -5- development of Brazil's network of primary highways and to substantial improvements in the operations of the railways. After 1975, Bank lending emphasized a shift, in the highway subsector, from highway construction to maintenance and rehabilitation,and to the improvement and constructionof feeder roads to support agricultural development. Since that shift, the Bank has made two loans (High- ways VI, US$114 million, 1979, and Federal Highway Sector, US$210 million, 1984) for highway rehabilitationana maintenance; three loans totaling US$319 million for feeder roads programs, managed by Brazil's National Economic and Social Devel- opment Bank (BNDES), which provide financial and technical assistance to the states and municipalities for constructing and improving feeder roads; and a loan of US$240 million (NorthwestHighway, 1981) to finance the highway and feeder roads components of a comprehensive program for the development of the Northwest Region. rhe Bank is also supporting feeder roads improvement and maintenance through components of 13 ongoing agricultural or rural development projects. The Bank has made a loan of US$159 million for the construction of a surburban rail mass transit system (Second Urban Transport-PortoAlegre-Project, 1980), and it is helping to finance the constructionof an 890-km long railroad in Northern Brazil as part of the Carajas Iron Ore Project. Bank experience with these projects is summarized in Annex 1.

1.14 The Bank's association with RFFSA dates back to 1971 when the first Bank loan (Loan 786-BR, for US$46 million) was made to help finance the rail component of an iron ore mining project in Minas Gerais. The Bank approved a second loan to RFFSA in 1975 (Loan 1074-BR for US$175 million) to finance a portion of its 1975- 1979 investment plan. A project performance audit report for the first project concluded that it was completed successfully 1/. The second project completion report was issued on June 22, 1983. The program which the project supported had a large number of individual projects in many areas of the railway, for a total estimated cost of US$3.2 billion, and was too large for the railway to implement; therefore, many components had to be postponed. Further, although achievements were significant regarding the institutional development of RFFSA, the project's objectives for broader policy reforms involving the Government were largely un- attained. The design of the new project has been influenced significantly by this experience. In particular, the investment component has been limited to two projects of high priority in RFFSA's plan, and the policy and institutional development component has been designed to support the full implementationof the policy decisions made through the December 4, 1984 Presidential Decree.

II. TMI FEDERAL RAILIAY

A. RFFSA's Organization and Fnances

2.01 RFFSA as a federal enterprise (virtually all the shares are owned by the Government) comes within the portfolio of the Ministry of Transport (MT). Gov- ernment approval is required for the railway's operating and capital budgets, for tariff adjustments and for matters of public interest such as line closures and elimination of services. Daily operations are managed by 12 executive directors appointed by the Minister of Transport. In addition, there is an Administrative Council with representativesfrom Government agencies responsible for coordina- ting RFFSA's activities with those of other transport agencies. Operationally, RFFSA is organized into seven regions and a separate division, in addition to the Head Office (Chart 27150). Presently, RUFSA has a staff of 67,000.

1/ Issued with Secretary's Memorandum M-83-59 of January 14, 1983. -6- 2.02 IFFSA haa, until recently, been responsible for operating the suburban rail mass transit services in Gio de Janeiro and Sao Paulo and smaller commuter services in other major cities. The operation constantly resulted in considerable losses, which were covered by Government subsidies. The Government has been un- able to reduce these subsidies when, for a high percentage of the working popula- tion of the large metropoles, the actual cost of commuting which, in addition to long suburban railway trips, frequently includes several bus rides, gradually rose at a time of reducing personal incomes. In early 1984, the Government decided to free RFFSA from the politically flavored operational and financial problems that characterize commuter services and established a separate company (Companhia Bras ileira de Trens Urbanos - CBTU) to take over RFFSA's responsibilities. While CBTUis a subsidiary of RFFSA (and, to a smaller extent, of EITU and BNDES), for all purposes it will operate independently from the railways, with separate operating and investment budgets. The Government is expected to exercise direct control over CBTU's operations and finances; it would also be able to identify more clearly the subsidies involved in commuter operation. While CBTU's separation for operational purposes is practically completed, there are outstanding matters between RFFSA and CBTU, such as formalizing the conditions for using each other's facilities. RFFSAconfirmed during loan negotiations that all arrangements related to CBTU's separation will be completed by the end of 1985, and that it will not make payments or revenue transfers to CBTUunless provided for under these arrangements.

2.03 For over a decade, RFFSA depended upon Government subsidies to meet its operating deficits, to service its debts, and to undertake capital investments. Nevertheless, apart from the commuter services, the railway's financial performance has been improving steadily since 1979. Working deficits turned into sur- pluses (US$52 million equivalent in 1984), and operating losses reduced by about 73Z, from US$384 million in 1979 to US$104 million in 1984. The working ratio, taking into account normalization payments, improved from 1.51 in 1979 to .92 in 1984, and the operating ratio improved from 1.73 to 1.16. Without normalzation payments, the working ratios were 1.58 and 1.08 respectively, and the operating ratios were 1.81 and 1.36. Real cost savings were major factors: personnel costs were reduced by 39Z between 1979 and 1984 because of the reduction in the number of employees and in remuneration. The total working cost per ton-km decreased by about 37% in the same period. The improvements, however, were somewhat exaggerated by deferred maintenance due to Government budgetary constraints, and by insufficient depreciation due to lower-than-appropriate asset value indexing. Regardless of the improvements, the railway's freight and inter-city passenger operation still does not produce positive financial results, and, taking into account depreciation and finance costs, RFFSA's 1984 loss was about US$480 million, out of which some US$383 million was interest. Operationwise, the major sources of the losses were the operation in the Northeast region, nonremunerative freight traffic in the other regions (in particular, such commodities as cement, grains and fertilizers for which tariffs are below short-run marginal cost), and the inter-city passenger services. These three businesses were estimated to represent about 25%, 50% and 25% respectively of the operating losses. Details of past financial results are shown in Tables 4.1 to 4.4. The project would aim toward improving RF1SA's financial performance through implementing appropriate action plans; while the improvements would be gradual, RFYSAwould be expected to recover the full costs of its operations within a reasonable time (para. 2.19). - 7 -

2.04 One of the main problems affecting RFFSA's finances was the fact that it could not fully function as a commercial enterprise with autonomy regarding investment decisions, closures of nonremunerative lines and services, and tariff setting.Investment decisions have been made at the Government level, often without taking full account of RFFSA's priorities and/or fund-generating capacity. Also, RFFSA's proposals with respect to tariff setting and the operation of nonremunerative lines and services have been subject to Government decisions which may not have been based upon commercial considerations. Because of the Government tariff restrictions, which kept revenue increases lagging well behind the cost increases, and because of the continually deteriorating value of the Cruzeiro over the last decade, RFFSA's debt obligations reached a practically unmanageable level, and the Government had to pay the railway's annual debts regularly. RFFSATs accumulated debts (including interest) reached about US$3.9 billion by the end of 1984.

2.05 To alleviate the situation, the Government, through a Presidential Decree issued on December 4, 1984, assumed as capital contribution the railway's debts incurred until the end of 1984 and established a commercial framework for the future operation of RFFSA. The Decree provides the railway with: (a) tariff freedom from 1988 and a guarantee that, until then, at least the real values of its cur:ent tariffs would be maintained; (b) a legal framework for normalization payments; (c) full responsibility for formulating corporate investment plans based on the company's priorities and consistent with its capacity to invest; and (d) responsibility for closure of the nonremunerative services which are not subject to normalization payments. Although RFFSA, to a certain extent, would still be an instrument of the Ministry of Transport to implement Government policies in the subsector, the Decree provides the company with a solid basis for wide management autonomy, together with the other necessary prerequisites for a commercially viable ope:ation. The project, through its various action plans, has been designed to support this aim.

D. The Economic Role of the

2.06 RFFSA has, over the past 25 years, gradually specialized in the transport of a few, essentially bulk, products over long hauls. With the development of the paved highway network, RFFSA lost significant shares of the break-bulk, short-haul and passenger markets to the competitive road transport industry. Meanwhile, mining and industrial development in the Southeast and agricultural growth in areas served by its network, as well as the more recent expansion of exports, have given RFFSA a key role in the Brazilian economy.

2.07 RFFSA's freight traffic increased at annual average rates of 8% in tons and 10.6% in ton-km during the 1970s. In 1981-1983, it decreased to about lOZ below its 1980 level, but it rose sharply (by over 14% in ton-ki) in 1984, reaching 77.2 million tons and 33.8 billion ton-km (Table 2,1). Exports of iron ore, shipped essentially by the Mineracoes Brasileiras Reunidas (MBR) mining group from Minas Gerais through RFFSA's central line, contributed significantly (about 40%) to the traffic increases of the 1970s; and they accounted for almost all of the subsequent reduction when the international market for iron ore weakened. RFFSA, however, steadily developed several important markets over the last 15 years. With the growth of heavy industry and, more recently, of steel exports, RFFSA increased its traffic of industrial inputs, particularly coal, iron ore and limestone, and its traffic of cement and steel products, the latter by an average 15% p.a. The transport of grains and grain products, particularly soya and soya pellets, also developed rapidly with the expansion of the agricultural frontier to the west, which has been turning the railway into the most economic transport alternative for many shipments to the processing and consumption centers and to the ports on the Eastern seaboard. RFFSA also increased its traffic of petroleum products by an average 16% p.a. in the past decade, particularly by shipping increasing volumes on much longer hauls to the developing regions in the interior of the country. As a result of these rapid increases, RFFSA's 13 major products accounted for about 90% of total ton-km in 1984, as against 75Z in 1970. Also, the average haul length rose from 250 km in 1958 to about 450 km in 1983-1984.

2.08 RFFSA's inter-city passenger traffic decreased from about five billion passenger-km in the early 1960s to 1.7 billion in 1981. In 1982, the results of a study carried out by RFFSA, showing that the railway could not compete with the bus and air transport industries in most segments of the market, led RFFSA, with Government concurrence, to withdraw or reduce the frequency of most of its nonremunerative passenger services. In 1984, traffic consequently dropped further down to 1.2 billion passenger-km, and it is expected to continue decreasing, although at a slower pace, as a result of RFFSA's commitment to further reductions of services (para. 3.06).

2.09 RFFSA prepares short and medium-term forecasts of the transport demand and rail traffic for the purposes of operations and investment planning. Market surveys, in which existing and potential major customers are requested to prcsent their production plans and transport needs, are carried out annually. The resulting estimates of the demand are the basis for the railway's transport plans, traffic forecasts and marketing action plans. This forecasting, which has been performed by RFFSA's own marketing staff for the last four years, has significantly improved in quality, and it is now reasonably accurate for short- and medium-term planning purposes. In order to complement these forecasts, RFFSA, with assistance from GEIPOT and individual experts, carried out commodity studies which focused on medium- and long-term forecasts of the product supply and demand, and of the railway's traffic. A summary of these forecasts is given in Annex 2.

2.10 RFFSA's freight traffic is expected to increase at about 6% p.a. during the second half of the 1980s (Table 2.1). As a result of the recovery, in 1984, of the demand for iron ore, exports of this product through RFFSA's system would grow at an average 4.3Z p.a. and reach their 1980 level of 14 million tons by 1987. The local steel industry, with new production units now coming into service, would also generate an increased demand for iron ore as well as for limestone; RFFSA's traffic of these two products would increase by 3.6% and 7.2% p.a. respectively. The demand for coal, which is mined in the South, would also increase substantially, in particular with the ongoing conversion to coal of a number of cement plants in the states of Parana, Sao Paulo and Minas Gerais; it is estimated that RFFSA's coal traffic will consequentlyincrease by an average 7.0% p.a. Although exports of steel products and pig iron are still increasing rapidly, RFFSA's transport of these products overall is expected to develop at a much slower pace than in the past. This is also true for cement, as a result of a weakening demand, although bulk transport should enable RFFSA to increase its market share. The transport of grains and grain products offers MFFSA good development prospects. With the project, RFFSA would be expected to significantly improve its participation in the increasing demand for the transport of grains and grain products from North and West Parana and from Mato Grosso do Sul to the processing plants in Ponta Grossa and to the port of Paranagua, and, to a smaller extent, in the transport of grains produced in the 'CerraCios region of Goias and Minas Gerais. -9-

C. The Rationalization of Operations and Network

2.11 KFESA, during the past 15 years, completed a number of programs to reduce nonremunerative freight and passenger services and to close low traffic density lines with a view toward gradually rationalizing its operations and network, consistently with the traffic specialization described. Between the late 1960s and 1982, aU services were withdrawn, and, in some cases, rails were lifted, on a total of about 10,000 km of low-traffic-density lines. Services were also discontinued on a further 2,000 km of lines between January 1983 and April 1985. Although additional service reductions and line closures would have been desirable from both commercial and economic viewpoints, the Government has requested RFFSA to maintain them for various reasons, including defense. Neverthe- less, RFFSA, in order to reduce losses on such lines and services, undertook cost- saving measures such as reductions in service frequency and track maintenance levels, and improvements in train formations.

2.12 Since its current cost accounting system does not permit accurate iden- tification of the costs and revenues of individual services or line sections, RFFSA unaertook, in 1982, to assess its losses on such services and line sections through specific cost-of-service analysis. Four areas of RFFSA's operations were identified as having significant scope for cost savings. Regarding the first one, the inter-city passenger business, in 1983-1984, RFFSA, with Government concurrence, discontinued a large number of services representing over two million train-km per annum (or 20% of the total). A program for further reductions of passenger services has been included in the project (para. 3.06). The second area is the Northeast system, which is characterized by low traffic densities on a large portion of its network, and by high operating costs. The Government, however, considers the railway system an important service to this poor region and requires RFFSA to operate it. In order to minimize the net cost of operating the Northeast system, besides further reductions of freight and passenger services and closures of secondary lines, broad organizational and managerial reforms will be necessary to adjust to the low traffic level. RFFSA has identified a number of such necessary reforms, including restructuring of track and rolling stock maintenance activities, reformulation of operating and administrative methods and procedures, closure of stations and terminals and promotion of intermDdal transport. A special action program was prepared to implement these reforms during 1985-1989; the program is expected to lead to a reduction of at least 13% of the total operating costs (excluding depreciation) by 1989 as compared to their 1984 level (para. 3.06).

2.13 The third area for rationalizationis specific commodity traffic on the rest of the system. Northeast and passenger business excluded, the bulk of RFFSA's past losses have been generated by specific co odity traffics subject to nonremunerative tariffs, in particular cement, grains and fertilizers. Since the traffic is large, even a small loss on a ton-km basis results in substantial companywide losses. Although the bulk of this traffic is on medium- and high- traffic-density lines, it is distributed among a large number of origin and/or destination stations and terminals on these lines, resulting in significant operational inefficienciesand in high operating costs. Great scope for cost savings therefore exists in consolidating commodity flows, particularlygrains and grain products, into fewer origins and/or destinationson the system, and in developing intermodal transport accordingly. Traffic consolidation,which would be supported and complementedwith appropriate tariff and marketing actions (as discussed in Section D following), would permit the gradual closing of low traffic stations and - 10 - the creation of specialized terminals. It would also facilitate the rationalization of train operations, and permit more unit-through-trains. For this purpose, RFFSA has prepared an action program which would be included in the proposed project; two pilot programs would first be implemented in the two corridors of Parana and Goias-Minas Gerais, and the program, if successful, would, in a second phase, be e.-tendedto IFFSA'sentire network (para. 3.;06).

2.14 Although the final withdrawal of services on low traffic lines would result in only moderate savings because RFFSA nas already reduced services, as the fourth area for rationalization, RFFSA identified about 3,500 km of such lines (some in the Northeast) for complete withdrawal of services and closure with a savings estimated at about US$6.0 million p.a. About 2,000 km of these lines had been closed prior to mid-April 1985. RFFSA and the Government are committed to close the remining 1,500 km between mid-1985 and mid-1986, and to establish appropriate administrative mechanisms to implement and monitor a continuing program of not comercially viable service reductions and line closures. RFFSA would annually assess the operational results of its individual lines and services to establish their viability, and, based upon this assessment (rather than upon traffic density), RFFSA and the Government would agree on the lines and services to be closed and on those to be maintained during the following year, as well as on the correspondingnormalization payments (paras. 3.06 and 3.07).

2.15 The Government is making normalization payments for the nonremunerative services which it requires MFFSA to operate. Two regions and one subregion are subject to normalization payments. For freight traffic, the payments are made according to a simple formula representing a fixed percentage (80 or 85%) of the net loss. For passenger services, the normalization payments cover the entire losses. Between 1979 and 1983, the annual normalization payments represented about 20X of the total operating revenues of RFFSA. The existing form of normalization is unsatisfactory since it gives RFFSA little, if any, incentive to improve the efficiency of the services for which normalization payments are made. Fur- ther, since payments are made on a regional, rather than individual, service or section-of-line basis, there is no incentive for selective efficiency improvements. A satisfactory normalization payment system should: (a) permit the efficient operation of not commercially viable services that the Government judges essential; (b) encourage the provision of the services at the lowest possible net cost; and (c) allow for regular review of the need for normalization payments for each individual service. An action plan has been prepared to develop the system of normalization payments accordingly; its implementation will be supported by the project (para. 3.07).

D. Costs and Tariffs, Maxketing and Cost Control

2.16 The costing system currently used by REESA to measure and allocate its costs to different services, based upon the recommendations of a Bank consultant, was introduced in 1973. Operating costs (including depreciation on a national basis) are aggregated into some 90 cost categories, each being classified as direct or indirect. The indirect costs are considered to be fixed, and the direct costs are divided, on a percentage basis, into fixed and variable components. The percentages were established at the time when the system was implemented,and, although some adjustments have been introduced, they are generally no longer appropriate as a result of the changes in relative costs and in traffic. Costs are aggregated to regional (in some cases subregional) levels before unit costs are calculated. An attempt has been made to differentiate between unit trains and - 11 - wagon load trains, but the same unit costs and some operating parameters are still applied to both train types. The system therefore does not produce regularly (and without specific, time-consuming "cost of service' studies) the cost information which would be needed for effective cost control, tariff design and marketing. RFFSA is aware of these deficiencies and is in the process of upgrading its traffic costing. A first improvement, aiming to aggregate costs at the line-section level, is already operational and is being refined. While this improvement is significant, more work is necessary to establish a system that will permit the costing of individual services and individual traffic flows by different train types. An action program (with technical assistance) has been included in the project to complete this work by the end of 1986 (para. 3.08).

2.17 The tariff structure of RFFSA was introduced in 1968, and it has changed very little. RFFSA's revenues are based upon published tariffs and special contract rates. The products that are subject to published tariffs are separated into five groups, and, for each group, there are distinct tariffs based upon fixed charges plus variable charges per unit of distance. In addition, during the past years, 11 special tables (with lower variable charges) have been introduced for specific products. With large traffic volume customers (e.g., MBR for iron ore or PETROBRAS for petroleum products) and with customers who, in addition to normal rail services, require from RFFSA pick-up or delivery services to or from rail heads, RFFSA can negotiate special contract rates and subcontract road transport to trucking companies. RFFSA's tariffs (and, to a large extent, contract rates for key commodities) are controlled by an interministerial comittee (CIP), which determines the prices of commodities and services in Brazil (para. 2.19). Until recently, CIP has authorized RFFSA to adjust its tariffs according to various price indices, providing some scope for increases higher than the consumer price index (INPC). However, until 1982, there was no agreed time frame for regular tariff adjustments, and the time lag between RFFSA's request and CIP's authorization often reddced the effectiveness of the tariff increases. Since January 1983, quarterly tariff adjustments, equal to the variation of the INPC, have been introduced.

2.18 Since RFFSA's tariff structure has hardly changed during the last 17 years, and since most of the revisions involved setting tariffs, with a view toward offsetting inflationary impacts, at a socially and politically acceptable level, the current tariffs have only an incidental relationshipto the market conditions and to the costs of the services provided. For example, in 1984, each of the average revenues of 11 products (representingabout 75% of RFFSA's traffic) were considerably below the tariffs that were charged by trucks, and the average revenue of only one product (coal) covered the applicable total operating costs. In the same year, the average revenues for only four products exceeded the relevant average working costs, and, in the case of cement, soya, corn and fertilizer, not even the medium term marginal cost was recovered (Table 2.2). During the last six years, the average freight revenues hardly increased in real terms; therefore, the improvements of RFFSA's financial performance were essentially related to cost-savings. A preliminary study of a commercially oriented tariff policy and of alternative strategies to meet commercial objectives was completed (with GEIPOT's assiotance) in October 1984. The study clearly indicated that, in the future, selective tariff adjustments, based upon selective marketing, should complement cost savings to eliminate the railway's operating deficits. - 12 -

2.19 RFFSA's tariff freedom, effective in 1988, will permit the railway to introduce cost-based, market-orientedtariffs in line with its corporate objectives. However, in order to ensure the gradual improvement of the railway's finances, tariff/marketingactions will be introduced prior to 1988. As a first step REFSA's tariffs were increased, in February 1985, by 10% above the 1984 December quarter inflation. RFFSA also intends to introduce (with the Govern- ment's support) cost and tariff measures to recover, by the end of 1985, at least the relevant working costs of transporting cement, grains and fertilizers. In addition, by the end of June 1985, RFFSA will complete a costing and marketing study covering the operation of the 13 most important products representingabout 90% of its total traffic, and will develop a plan to recover, by the end of 1986, at least the relevant working and administrative costs plus depreciationand interest on rolling stock. Under the project, RFFSA will develop (with consultant assistance) a new tariff structure to be introduced at the end of 1987, with built-in incentives for freight consolidationand for phasing out unprofitable services, with the aim of full cost recovery.

E. Operations and Maintenance

(i) Operating Performance

2.20 KFFSA's operating performance has been mixed since the late 1970s, after substantial improvements made during most of the last decade; however, overall performance, as compared to other railway systems in developing countries, remains satisfactory. The availability of locomotives decreased from 82% in 1980 to 80% in 1984, but, more important, their reliability and effectivenessdeteriorated, further affecting their annual mileage in traction (52,000 km in 1984 as against 63,000 in 1980). Although the availability of wagons remains satisfactory, and their productivityhas increased from 1,800 to almost 1,900 net ton-km per wagon day in use, their average turnaround time (excluding MBR iroa ore export traffic) worsened to almost 15 days, reflecting longer stays in terminals. On the other hand, train compositionshave continued to improve, the average net train load increasing from 840 to 969 tons. Of more significance, however, the productivity of RFFSA's staff has improved considerably, as a result of drastic rationalization measures achieved over the last 15 years by RFFSA's successive managements; the railway's staff was reduced from almost 130,000 in the early 1970s to about 67,000 in 1985 2J, Table 2.3 gives a summary of RFFSA's operating statistics for 1979-198Z.

2.21 Operating performance is obviously affected by many factors. One must first remember,when analyzing RFFSA's operating statistics, that RFFSA's most important corridors are in very difficult terrain in the mountainous central and coastal regions; train size and speed restrictions,necessary recompositionsof trains and the need for helper locomotives on some sections have an important impact upon performance. In addition, these regions were affected in 1982-1984 by unusually heavy rains which did considerable damage to the railway infrastructure and had an adverse effect upon performance. Other important external factors during the first half of the 1980s were the general economic situation and the Government's austerity program which, with the associated fund shortages and import restrictions,led RFFSA to reduce maintenance standards, particularly for

2/ The 1985 figure excludes a staff of about 15,000 transferred to CBTU. - 13 - locomotives, and to defer essential track renewals and infrastructure rehabilitation works. Nevertheless, in the operation of the railway, there are also important problems within the realm of iFFSA's management to resolve; they are discussed in the following sections.

(ii) Operations Mane t

2.22 Operations planning and management responsibilitiesare vested essentially in the regions. Each regional superintendencyhas control over the locomotive and car fleets assigned to the region, and over train programing and sched- uling. While such autonomy allows regionsl management to plan for the best possible use of its fleets within the region's network, it leads to considerable inefficiencies in dealing with interregional traffic, including the changes of line haul locomotives at regional borders. Also, despite the efforts of the headquarters' Operations Department to arrange for temporary interchanges of rolling stock, the distribution of locomotives and cars always remains far below a system- wide optimum. These factors have been, and still are, the major contributorsto the poor utilization and productivity of RFFSA's locomotives and rolling stock.

2.23 In order to improve the management of its operations, RFFSA undertook, in 1978, the development of a real-time operations information system (OIS). The Government's computer policy led RFFSA to develop a system based upon minicomputers which are manufactured in Brazil, despite their incompatibility regarding system language and communication disciplines with the minicomputers which were in place in the regions and with the mainframe which is installed at headquarters. The new hardware is now in service in the regions of Parana, Minas Gerais and Rio Grande do Sul, and the installation for the whole network is scheduled for completion by the end of 1985. The software packages currently available, which have been written internally at a cost of many man-years of development time, cover (besides data files on fixed installations)movements of locomotives,rolling stock and trains, and inventory of cars at stations and termJnals. The OIS, as developed in a region-basedconfiguration, which is consistent with the present organization of operations, is expected to improve operations management at the regional level and, when fully operational, to generate increases of about 5% in the utilization and productivity of the regional fleets. It would not, however, provide RFFSA's headquarters with real-time information as necessary to improve interregional coordination and to optimize locomotive and rolling stock distribution companywide. Furthermore, maintaining two independent computer systems - one for operations management and the other for finance, accounting and materials management - would be an obstacle to the effective management of RFFSA.

2.24 RFFSA wishes to improve the management of its operations, particularly through strengthening interregional coordination, and to redirect the development of its OIS accordingly. RFFSA has agreed, first, to develop an organizational plan that removes data processing from the Controllers Department, the OIS from the Operations Department and telecommunications from the Engineering Department to form a new Infcrmation and Control Systems organizational unit and, after approval by its board of directors, to present it to the Bank for comment (para. 3.16). RFFSA would also, under the project, prepare and implement an Operations Management Development master plan which would provide for a reorganization of operations management to strengthen interregional coordination, and for an appropriate development of the OIS and of the related telecommunications and data transmission system (para. 3.10). The plan would, in particular, define the - 14 - details of a strategy to integrate the OIS and data processing hardware and software systems into a teleprocessing network. It is expected that the hardware currently being installed in the regions for the OIS would be integrated, with the regional minicomputers used as data concentrators. The plau would also aim at an appropriate distribution of the various functional responsibilities between RFFSA's central and regional administrations so that the efficiency gains that the OIS would permit would be fully realized. It is expected that functions such as the control of locomotives and wagons (including the distribution of empty wagons), train movements, and the routing of traffic would ultimately be performed centrally, while other functions such as terminal, yard, workshop and store management would be distributed at the regional or district level.

(iii) Hotive Power, Roflig Stock and WVrkshops

2.25 1FFSA's system is essentially diesel-operated. At the end of 1984, XFFSA had 1,628 diesel locomotives, of which 771 units, i.e., almost half the fleet, were over 20 years old and 363 units (or 22X) were over 25 years old (Table 2.4). RFFSA purchased 20 new diesel locomotives in 1984, which will be delivered in 1985-1986 to replace some of its oldest units. RFFSA also has 53 electric locomotives operating on the broad-gauge network. The condition of the diesel fleet has deteriorated significantly during the past five years as a result of aging and of RPFSA's inability to make the necessary heavy overhauls and rehabilitation works in the face of fund shortages and import restrictions. An increasing number of the older, unreliable locomotives have therefore been used essentially for switch work.

2.26 RFFSA's strategy for the next five years is to remanufacture the locomotives which are of a sound design and which can economically be upgraded to appropriate standards, to gradually retire or scrap those of obsolete design when subject to a major failure, and to purchase new, more efficient locomotives to renew the fleet as needed to cope with the increasing traffic load. Since the need for locally stationed switch locomotives is expected to lessen as a result of the railway's strategy to consolidate stations, terminals and yards, RFFSA intends to gradually replace a number of switch locomotives with appropriately remanufactured locomotives which would be used mainly for switch work, and for line-haulage when refueling or maintenance inspection is needed. This arrangement would also enable RFFSA to consolidate fueling and maintenance facilities.

2.27 RFFSA has undertaken the first phase of its locomotive remanufacturing program. A total of 84 locomotives, for which components and spare parts have been purchased, are scheduled for remanufacture or heavy overhaul in 1985-1986. The corresponding work is being contracted to the local industry. There are also 258 units (of G8 and G12 models), built between 1958 and 1963, which a.ght need to be remanufactured when subject to a major failure, and which could then make adequate road-switch locomotives. Table 2.5 shows the justification for remanufacturing these locomotives. RYFSA's investment plan for 1985-1989 includes a second phase of the remanufacturing program (for about 160 of the above-mentioned units) as well as minor iLvestments to improve the fuel efficiency of certain models.

2.28 RFFSA estimates its needs for locomotive purchases during 1985-1989 at about 50 new units, which would replace the old line-haul units to be used for road-switch work (Table 2.6). The forecast assumes annual retirements of line- haul locomotives contained below 3% of the fleet; improvements in availabUlity of about 6%, to result from the proposed maintenance action program; increases in - 15 - utilization of up to 10% (depending on the region), to result from the operations management action program; and increased train loads and speeds, to result from planned track rehabilitation and improvement works, from an increasing proportion of unit-through-trains, and from Improved train formations. These improvements are consistent with the currently expected Impacts of RFFSA'S investment and action plans. RFFSA will regularly update its assessment of locomotive needs, which will be reviewed by the Bank as part of the annual joint review of RFFSA's rolling investment plan (para. 3.11).

2.29 RFFSA had about 39,000 wagons in commercial use by the end of 1984, of which about 20% were over 30 years old (Table 2.7). The general condition of the fleet is good, but older wagons need to be modernized. RFFSA has prepared, and included in its investment plan, a program for the conversion of box cars into grain cars and the modernization of about 1,800 units. The program consists of improvements to braking systems, installation of grain doors in box wagons and of roller bearings. Presently each region is making its own overhauls and improvements, but generally not up to the standards of modern techniques. RFFSA intends to implement the program through setting up a production line. It estimates its needs for new wagon purchases, during 1985-1989, at between 4,000 and 6,000 units, depending upon the impact of the operations management action plan (Table 2.8).

2.30 The railway has 121 locomotive - and 94 rolling stock - maintenance and servicing facilities, inherited from the individual predecessors of RFPSA, and, therefore, carrying overlapping activities and responsibilities. The regional structure of RFFSA only perpetuated the situation. Each region has a main workshop for locomotive repair and component overhaul; in most cases, locomotives must wait while components are being repaired. RFPSA's shops are in. good condition, but, with a few exceptions, both the work methods and the machinery used are old or obsolete. Most of the fueling facilities lack anti-pollution or safety devices. The project includes an action program aimed at a gradual consolidation of these facilities and at developing a unit exchange component program. Two pilot programs would be implemented, under the project, in the corridors of Parana and Goias-Minas Gerais (para. 3.30).

(iv) Track Eadutenance

2.31 RFFSA's system consists of about 23,000 route-km, including about 21,200 km of meter gauge and 1,800 km of broad gauge (1.60 m) lines; there are about 400 km of double tracks, and 800 km are electrlfied (Map IBRD 18760). Because of the mountainous terrain, alignments, particularly in the two export corridors and in the SK-3 and SR-4 regions, are often poor with many curves and steep gradients. Track infrastructure is poor in many sections, and urgent works are needed specifically for the stabilization of cuts and embankments and improvements in drainage systems. The tracks are, at besc, in fair condition; rehabilitation and track upgrading are crucial in the two export corridors to allow for coping with increasing traffic.

2.32 The railway has been undertaking a program of selective track renewal, using heavy rails with welded joints (in some sections, with elastic fastenings), supported on concrete or treated-timber sleepers; the objective has been to provide an improved standard of track and safety conditions for sections where traffic increases markedly and where heavier locomotives and freight cars would be used. However, during recent years, this program, together with the general maintenance of the track, had to be scaled down because of financial constraints. - 16 - An important effort will be needed to reduce the backlog of track maintenance. In particular, the planning, programing and monitoring methods and procedures will need to be strengthened. An action plan has been included for that purpose in the project (para. 3.10).

F. Investment

2.33 RFFSA's investments totaled about USS2.8 billion equivalent over the five-year 1980-1984 period; during the period, however, annual capital expenditures decreased by almost two-thirds (Table 2.9). The construction of the Ferro- via do Ago and the improvement of the suburban commuter systems each accounted for about one-third of total investment. The other major investments were related to the rehabilitationof the meter-gauge network, the improvement of the central line and the Sao Paulo branch, and the purchase and rehabilitation of locomotives and wagons. New investments on the Ferrovia do Aco were drastically cut back in 1983 and stopped in 1984. As a result of the Government's austerity program, RFFSA had to postpone needed rehabilitationworks on the high traffic density lines of its meter-gauge network.

2.34 RFFSA's investment plan and related financing plan for the period 1985-1989 have been organized into three groups (Tables 2.10 and 2.11). Groun I, which consists of investments approved for implementation with secured (or quasi- secured) financing, includes, besides the components of the proposed project, ongoing rehabilitationworks on critical line sections in Rio Grande do Sul and Bahia (BNDES-financed), ongoing rehabilitation-overhaul of 84 locomotives and delivery of the 20 locomotives purchased in 1984 (foreign-bank-financed); and purchase of 3U0 special-purpose wagons and computer hardware (BNDES-group- financed). *Group II, which'consists of contemplated investments for which pre- investment studies need to be completed and final scope, programing and/or financing need to be firmed up, includes the improvement of yards, terminals and traffic control and telecommunications systems on the Central line; a program for locomotive remanufacturing and improvement and for wagon modernization; the development of operations and management information systems, and the improvement of workshops. Group III consists of proposed investments which, on the basis of the results of prefeasibility studies, seem to be sound. However, preparatory work for these components is still at an early stage. Investments related to the Ferrovia do Ago project have been stopped, with the exception of the already contracted delivery of equipment and materials at a cost of about US$82 million over 1985-1988 (representing 7% of the total investment plan); there is no decision to complete the project.

2.35 Investment priorities have been defined on the basis of the results of the commodity and traffic studies mentioned above, and of an extensive screening of the investment alternatives identified on the meter-gauge network. Feasibil- ity studies have been completed for the investments included in Group I. The economic evaluation of the project's couponents is summarized in Chapter V. Both rehabilitation projects in the States of Rio Grande do Sul and Bahia have been appraised and are being financed by BNDES. The Rio Grande do Sul project, which includes infrastructure works on about 300 km, and track renewals on about 200 km of main lines, as well as yard and telecommunications improvements, has an estimated economicrate of return (ERR) of 17Z. The Bahia project, which includes drainage works and track renewals on a total of about 200 km of lines, has an estimated ERR of 15%. The justification for locomotive and rolling stock rehabilitation and renewals was discussed in Section E preceding. - 17 -

C. Planning and . Traini.g

2.36 RFFSA has made significant progress in the last few years in developing planning and management systems in various areas of the company, including marketing and production, operations (OIS), programing and budget control, finance, materials and personnel. Progress was also made in assessing investment priorities and in preparing and evaluating investment programs and projects. However, Government intervention in RFFSA's management and the lack of well defined company objectives and strategies have led each area to develop its own planning and management system independently from the other areas and often without taking full account of its information resources and needs.

2.37 For more effective direction and control, KFFSA needs to strengthen its planning and management systems. Priority should be given to the formulation of the company's objectives, policies and strategies within the commercially oriented environment newly created by the December 1984 PresidentialDecree, and to the definition of consistent objectives and operational targets in the various administrative areas and hierarchical levels; they would constitute the company's strategic plan. Programs and projects, both in areas of capital investment and of institutional development,would then need to be developed, updated, revised or even discontinued, consistentlywith the company's objectives. Emphasis should be put upon compatibility,or the integration of the various planning and management systems currently being developed, and upon the systematic appraisal of capital investment proposals. For that purpose, RFFSA's management will have to rely more intensively upon action planning, monitoring and evaluation techniques. The policy and institutional component of the project has been organized accordingly into a set of action plans and programs. It also includes a planning and management development action plan aimed at developing strategic planning, action planning and monitoring and evaluation systems and at preparing (and updating) RFFSA's strategic and corporate plans (para. 3.11).

2.38 The budget and cost control is basically decentralized. The process starts in April of each year, with the central management developing what it expects to be the total fund requirements for the coming year; fund ceilings for each region are developed in November and approved in December. The regions distribute funds to the cost centers, trying to accommodate the centers' requirements. After a budget revision in August, generally no further fund reallocation takes place between the regions, although, within a region, it can take place until the end of each year. The control of the use of the funds (with the exception of cash payments for materials which are rigidly controlled by the Head Office) are basically regional responsibilities. Central management uses the consolidated accounting data from the regions primarily for information and rarely for operative control. The budgetary system needs to be upgraded in a manner complementary to the costing system, with a clear definition of the performance responsibilitiesand accountabilities,particularly inside the regions, in order to become a useful tool for commercially oriented management control. The planning and management development action plan would include a component for that purpose (para. 3.11).

2.39 RFFSA has a commercial-typeaccounting system which meets the legal requirements of the country and is generally adequate for overall control. However, because of partial indexing (applied, until recently, at a rate less than inflation and cnly to fixed assets and long-term liabilities),neither the accounts nor the periodical year-end reports and statements, particularly considering the - 18 - accelerated Brazilian inflation, provide results in comparable terms. Apart from the insufficient indexing, the railway's fixed assets need to be revalued on a technical basis as well; the last such revaluation took place in 1979. As part of the action progras to upgrade cost information, RFPSA will develop, with consultant assistance currently being negotiated, and introduce, by the end of 1985, a suitable system of indexing to produce accounting information in comparable terms, and the railway's fixed asset inventory will be revalued, based upon technical considerations, by mid-1986 (paras. 3.08 and 3.09).

2.40 RFFSA has a well functloniug internal audit section. Also, in accordance with Brazilian legal requirements, the accounts are audited by Government auditors. In addition, the railway contracts private auditors whose reports on the accounts and the financial statements are generally ready within five nonths of the end of the year. The present audit arrangements are satisfactory, but the private auditors' work scope should be expanded to include management and systems audit with a view toward assisting RFFSA's management in turning the railway into a commercial entity.

2.41 RFFSA has given priority to the training of its technical and admlnis- trative staff over the past ten years, when large reductions were made in its work force. External training is provided in many fields through Government technical institutions and programs. Special needs such as training in troubleshooting me- chanics and train operation are provided for satisfactorily with internal resources. Training of administrative staff in the operation of the computerized OIS being installed is also adequate. RFFSA, however, has given less attention to the training of middle-level and senior-level management staff. Training at these levels will be needed to complement the various action plans and to achieve effective management development; a program has been included in the project for that purpose (paras. 3.11 and 3.12).

III. UK PRoJLcr

3.01 The main purpose of the project is the financial rehabilitation and the establishment of a framework for the commercially oriented operation of the federal railway, turning it primarily Into a freight carrier. The principal policy and institutionalmeasures necessary, which had been under discussion among the Government, RFESA, and the Bank for Almost three years, have recently been taken, in particular through a Presidential Decree issued December 4, 1984. The project is designed to provide support to RFFSA and the Government in implementlig these measures, as well as in improving transport efficiency in the two export corridors of Parana and Goias-Minas Gerais.

A. Project Objectives and Rationale

3.02 The objectives of the project are: (a) the financial rehabilitation and improved commercial performance of the federal railway; and (b) increased transport efficiency in the two export corridors of Parana and Goias-Minas Gerais. By achieving these objectives, the project would contribute to more efficient resource use in the transport sector, particularly through further specializing the railway in the services for which it bas comparative advantage over road transport, and to reducing public sector deficits. It would also contr,bute to facili- tating exports, especially the export of grains and grain products from the states - 19 - of Parana and Mato Grosso do Sul, and from the "Cerrados" region of Goias and Mias Gerais, as we-l as the export of various industrial products. 3.03 In addition to supporting the economic rationale of the project, which is consistent with the rationale underlying Brazil's stabilization program, the Bank would, in extending the loan, provide vital support to 1.FFSAand the Govern- ment to gradually turn the federal railway, through the implementation of a get of policies and action plans, into a commercially viable freight carrier.

B. Project Diecriptio= 3.04 The project includes a policy and institutional development (action plan) component, addressing companywide and sectoral Issues, and an Investment component consisting of the two export corridor projects. (i) Ike Policy and Inst Ibvelopmct ActionAutioial Plan

3.05 The policy and institutional development compacnct would conw_t of the implementation of policies and action plans for: (a) cost saviogp, rationaliza- tioo of the railway's operations and network, and normalization of not commercially viable lines and services; (b) tariff restructuring and adjustmental, and upgrading of cost-accounting and marketing; (c) operations and maintenance efficiency improvements; (d) strengthening of RFFSA's planning and management systes and training of management staff; and (e) improving transport (and Inter-railroad) coordination in the Southeast corridors.

3.06 The cost-savings and normalization action plan, which aims toward gradually rationalizing the railway ' operations and network, would consist of withdrawals (and frequency reductions) of not commercially viable passenger services; the withdrawal of all services on, and closure of, not commercially viable lines; and a program of specialization, consolidation and closure of railway stations and terminals. A special program would be implemented in the Northeast region to reduce the regional superintendency's deficit through further cost-saving measures, particularly related to the organization and management of operations and maintenance. It was confirmed during loan negotiations that RFFSA would: (a) between July 1, 1985 and June 30, 1986, close not less than 1,500 km of not commercially viable llnes, of which not less than 750 km would be in the regional superintendencies of Recife and Salvador and the operational division of Campos, and reduce passenger train services by not less than I million train-ki, of which not less than 400,000 train-km would be in the above-mentioned administrative units; (b) implement an operations rationalization program in the Northeast region as per terms of reference (TORs) and time schedule satisfactory to the Bank, and each year reduce the superintendency's total operating cost (excluding depreciation) by at least 2.5%, so that, in 1989, it should be at least 13% less than in '284; and (c) implement a station consolidation and closure program in the Parana and Goias- Minas Gerais corridors and prepare to extend the program to its entire network, as per TOKs and time schedule satisfactory to the Bank.

3.07 The system of normalization payments would be upgraded to promote efficiency, in particular cost savings, in the operation of the not commercially viable lines and services Which the Government requires RFFSAto maintain tempo- rarily. The system would allow the Government and KFFSAto annually review the need to maintain such lines and services, and to implement and monitor service and line closures. Agreement was reached, during loan negotiations, on che following - 20 - normalization mechanisms: (a) RFFSA would annually review the operational and financial results of its individual lines and services, establish their commprcial viability, and prepare cost-tariff revenue forecasts for the not commercially viable lines and services; (b) the Government would, on that basis and prior to July 31 of each year, define the lines and services it would require RFFSA to maintain during the following year, agree with RFFSA on the corresponding normalization payments, and arrange for the necessary budget appropriations and payments; and (c) RFFSA would, within one month, inform the Bank of the decisions taken, forward the supporting documentation for review and comment, and undertake to close its not commercially viable lines and services other than those under (b) prior to year end. Also, it was confirmed during loan negotiations that (d) from 1987, the normalization system would be based upon the upgraded cost accounting system and upon an incentive-based payment formula satisfactory to the Bank, and the system would be extended to all not commercially viable lines and services; (e) in 1985, normalization payments would be not less than US$60.0 million equivalent, and in 1986, they would be not less than 50X of the total nor-malization due; any amount owed to RFFSA on account of the 1985 and 1986 normalization would be paid not later thar the end of 1990; and (f) Government normalization payments to RFFSA, expressed as a percentage of RFFSA's total operating revenues, would be contained until 1989 below the designated percentages (12Z in 1989) shown in Table 3.1, and kept decreasing thereafter, through appropriate closures of not commercially viable lines and services.

3.08 The costing, tariff and marketing action plan would consist of upgrading RFFSA's cost-accounting and tariff systems with a view toward providing a sufficient basis to develop and implement appropriate marketing strategies and effective management control. The cost-accounting system would be upgraded to provide cost information for individual services and origin-destination commodity flows; to determine cost variability with traffic, operational methods and efficiency; to allocate common costs to individual services as appropriate; and to provide a reliable basis for cost forecasting. The dissemination of cost and performance information would also be improved, particularly its format and delivery speed, to permit effective monitoring, evaluation and corrective action.

3.09 RFFSA's tariff structure would be reformulated with a view toward gradually eliminating unjustified internal cross-subsidization and recovering the full cost of the individual services. It would ensure that, iu the short term, no freight would be carried at less than its avoidable cost and that, for traffic with long-term prospects, RFFSA would at least recover average c_ts. The new tariff 3tructure would also provide the necessary incentives to acLieve KFFSA's corporate objectives, in particular those related tc operational rationalization, traffic consolidation, operation of more unit-through-trains, and phasing out of nonremunerative services. Agreement was reached during loan negotiations that KFFSA would: (a) by the end of 1985, recover at least the total working costs of transporting wheat, soya, corn, fertilizers and cement; (b) complete a costing and marketing study covering its 13 most important products, and, based upon the results, develop, forward to the Bank for comment prior to July 15, 1985, and thereafter implement a plan to recover, by the end of 1986, the relevant working and administrative costs plus depreciation and interest on rolling stock; (c) upgrade its cost-accounting system and put it into operation prior to the end of 1986; and (d) develop a new tariff structure, and put it into effect not later than January 1, 1988, as per TORs satisfactoryto the Bank. - 21 -

3.10 The operations and maintenance action plan would aim toward upgrading management systems for operations, locomotive and rolling stock maintenance, and track maintenance. The operations program would iaclude the appropriate development of EFFSA's (computerized)operations information system (OIS), integrating it with the other management information and control systems (MIS) into a teleprocessing network, and a reorganization of operations to strengthen interregional coordination. A comprehensive master plan, covering the reorganization, the OIS and telecommunications would be developed, and software would be purchased to speed up development of the 0IS. The action program for improving locomotive and rolling stock maintenance would consist of consolidatingworkshops and servicing facilities in the two corridors and designing a plan to consolidate workshops companywide and to implement a component-exchange program for locomotive repairs. Also, a (computerized) MIS would be developed to help planning, programing, bud- geting and monitoring track maintenance. It was agreed during loan negotiations that RFFSA would: (a) prepare an operations management development master plan as per TORs satisfactory to the Bank, present it to the Bank for commpnts not later than the end of 1985, and implement it thereafter; and (b) implement a locomotive and rolling stock maintenance action program and a track maintenance action program as per TORs and time schedule satisfactory to the Bank.

3.11 The planning and management development action plan would aim toward (a) introducing strategic planning and preparing RFFSA's corporate plan; (b) upgrading management information and control systems; and (c) training management, in particular middle-managementstaff, in related planning and management techniques and in the efficient utilization of the systems. The strategic planning action program would focus upon a more explicit definition of the railway's objectives and policies, in line with the recent Presidential Decree; upon disseminating appropriate planning techniques, particularly for investment and action program design and evaluation; and upon preparing (and updating) RFFSA's corporate plan. The MIS development action program would focus upon upgrading information, monitoring and evaluation systems, including budgetary and cost-control systems, and upon disseminating project and task management techniques. Also, a project monitoring system would be established specifically for the project (para. 3.16). It was confirmed during loan negotiations that KFFSA would: (a) implement a planning and management development action plan as per TORs and time schedule satisfactory to the Bank; (b) regularly update its pluriannual investment plan into a rolling plan through systematic investment evaluations and review of priorities made in accordance with technical, economic and financial methods and criteria satisfactory to the Bank; (c) refrain from undertaking any investment unless it is justified according to the above-mentionedmethods and criteria; and (d) exchange views with the Bank each year on its investment and financing plans.

3.12 The management training program would include advanced in-service training for about 200 middle-level and senior-level managers of the head office and regional superintendencies in the areas of corporate p anning, project monitoring and evaluation, operations and maintenance management, marketing and cost-control, information and human resources management, and the training of about 20 instruc- tors. The program would be implemented through specialized training centers in Brazil and in other countries, and through seminars conducted by management training specialists. It was confirmed during loan negotiations that RFFSA would implement the management training program as per TORs and time schedule satisfactory to the Bank. - 22 -

3.13 The transport coordination - Southeast corridors - program would aim toward strengthening coordination among the three railway companies (RFFSA, FEPASA and EFNY) and the port companies in the Southeast region, as well as shipping lines, and would focus upon developing and implementing coordinated strategies for operations, marketing and development. Specific objectives would be: (a) to foster the coordination of the railroads' operations (eventually some administrative integration) in the Vitoria, Rio de Janeiro, Santos and Parana corridors and to facilitate intermodal operations at the ports and inland; (b) to strengthen marketing efforts to develop competitive multimodal railway-based transport services and to make the best possible use of existing facilities; and tc) to prepare and implement coordinated strategies and plans for the rehabilitation and development of the transport systems, consistently with the strategies for the agricultural and industrial development of the region. As part of this program, an assessment would be made of the technical and economic feasibility of the plans for commercializing and exporting large volumes of grains and grain products from the region of the cerrados of Goias and Minas Gerais. It was confirmed during loan negotiations that the Ministry of Transport would undertake the transport coordination action program, with the participation of the transport companies, as per TORs and time schedule satisfactory to the Bank.

(ii) Dhe Eport Corridor Projects

3.14 The investment component (the Goias-Minas Gerais and the Parana corridor projects, Maps IBRD 18761 and 18762)would include: (a) rehabilitationof track infrastructure and/or superstructure on the most critical sections of the two corridors; construction, rehabilitation and extension of sidings; and purchase of trackmaintenance machinery and plant equipment; (b) improvement of traffic control and telecommunications systems on high traffic density line sections; (c) rehabilitation and improvement of yards, of locomotive and rolling stock maintenance workshops,and of servicingfacilities; and (d) improvement of intermodal facilities.

3.15 Infrastructure works would include the stabilization of cuts and embankments, and improvements to drainage systems, on a total of about 650 line-kmin the Goias-Minas Gerais corridor and 600 line-kmin the Parana corridor; the rehabilitation of bridge structures in both corridors, and of tunnels in Parana; the lengthening of existing sidings, and construction of new sidingsfor improved crossing of trains. Superstructure works would consist of replacing rails, sleepers, fastenings and/or ballast on a total of about 650 line-km in the Goias- Minas corridorand 950 line-kmin the Parana corridor. Microwavetelecommunica- tions,and signaling systems ranging from spring switchesand radio-controlled block to relay-interlocking with supervisory traffic control, would be installed on the higher traffic density line sections (about 192 km in Minas Gerais and 254 km in Parana). A marshaling yard would be built in each corridor, and existing ones would be rehabilitatedor improved. Some workshop buildings would be expanded and/or equipped with additionalmachinery, and new locomotive fueling and servicingfacilities would be built. Eightintermodal facilities, consisting of grain silos of staticcapacities ranging from 10,000to 40,000tons, would be built upcountryon the two corridors (four on each one) to improve transshipment of grainsand grain products. Annex 3 gives the main designfeatures of the two corridorprojects. The necessarydetailed engineering designs are satisfactory. - 23-

C. Project Imp}e-tation

3.16 Project implementation would be the responsibility of RFFSA, with the exception of the transport coordination action program, which would be managed by MT. The various action plans would be carried out by RFFSA's respective head office directorates, with appropriate technical assistance, and with the support of the regional superintendencies. Development and installation of the related computerized information and control systems would be placed in a new organizational unit, regrouping the existing services for data processing, OIS and telecommunications. A new strategic planning unit would be established to carry out, with appropriate technical assistance, the planning and management action plan and to coordinate the implementation of the other action plans. The two corridor projects would be implemented by RFFSA's head office Engineering (for permanent way works and signaling), Operations (for yards and workshops), and Marketing (for intermodal facilities) Directorates, with the support of the respective depart- ments of the regional Superintendencies (SR-2 and SK-5); operation of the silos would be contracted to RFFSA's subsidiary company AGEF. A Project Management Unit which would be established in RFFSA's headquarters, with teams in SR-2 and SR-5, would have primary responsibility for the implementation of the two corridor projects and would coordinate the various organizational units involved. It was agreed during loan negotiations that RFFSA would establish and thereafter maintain organizational arrangements and a project monitoring system satisfactory to the Bank, and staff with adequate qualifications for the implementation of the project; agreement was reached on the organization plan and staffing plan for the management of the project, on outline terms of reference for the action programs, and on the reporting requirements. As a condition for loan effectiveness, RFFSA should put into effect the above-mentioned organization and staffing plans.

3.17 The implementation of the project would be monitored against a targeted time-schedule starting July 1, 1985 and ending December 31, 1989 (Chart 27093), and against the operational and financial performance targets shown in Table 3.1, which were agreed to during loan negotiations.

D. Project Cost and Finaacnng

3.18 The total cost of the project is estimated at about US$422.0 million equivalent, including US$7.7 million for the policy and institutional development component, US$188.8 million for the Goias-Minas Gerais corridor and US$225.5 million for the Parana corridor project. The foreign exchange cost component is about US$219.8 million, or 52%, and the tax component about US$58.2 million, or 14%. Total project cost includes physical contingencies for US$24.4 million, or 7.7% of base cost, and price contingenciesfor US$81.6 million (or 24% of base cost plus physical contingencies) estimated on the basis of the relevant standard disbursement profile (para. 3.21) and of the following forecast of price escalation for both local and foreign expenditures expressed in US dollars: 5.0% in 1985, 7.5% in 1986, 8.0% in 1987-1990 and 5.0Z thereafter. Summary and detailed cost tables are appended as Tables 3.2 to 3.5. Cost estimates are based upon March 1985 prices. The costs of goods and equipment are based upon ex-factory prices for similar items manufactured in Brazil and recent prices of imported items. The costs of civil works are based upoa detailed engineering designs and prevailing unit prices. The cost estimates for consultant services are based upon current local and foreign man-month rates; they provide for the cost of local transport, office equipment and other minor items and, where appropriate, international travel and per diem. - 24 -

3.19 The project would be financed from: (a) the proposed Bank loan of US$200 million (or 47% of the project cost); (b) two loans from BNDES totaling US$54.1 million equivalent (or 13% of the project cost): one of the loans (about US$32.2 million) is already effective for the Parana corridor, and a loan of about US$21.9 million is currently being negotiated for the Goias-M.inasGerais corridor; (c) a supplier credit of US$7.6 million (or 2% of the project cost), already effective, for the acquisition of specific components of the signaling systems; (d) RFFSA's own resources, of about US$118.0 million equivalent (or 28% of the project cost), of which US$55 million is secured by a recent sale of assets to Companhia Vale do Rio Doce (CVRD); and (e) Federal Government contributions, in the form of equity, of about US$42.3 million equivalent (or 10X of the project cost). Summary and detailed financing tables are appended as Tables 3.6 to 3.9. Agreement was reached during loan negotiations on the project financing plan and on the Government's guarantee regarding all the necessary counterpart funds.

E. Procurement

3.20 Procurement arrangements are summarized as follows:

Procurement Arrangents (Estimated Cost in US$ Million)

Procurement Method TOTAL Expenditure Category ICB LCB OTHER COST

A. Civil Works 104.8 93.1 197.9 (29.1) 1/ (25.9) B. Materials 72.3 29.9 102.2 (60.5) C. Equipment 86.6 15.4 7.6 3/ 109.6 (67.0) (11.0) D. Software 1.2 1.2 (1.0) E. Technical Assistance 9.6 2/ 9.6 (4.8) F. Training of Personnel 1.5 2/ 1.5 (0.7) TOTAL 263.7 138.4 19.9 422.0 (156.6) (36.9) (6.5) (200.0)

1/ Figures in parentheses indicate proposed financing by the Bank. 2/ According to Bank Guidelines. 3/ Supplier credit.

Goods financed by the Bank loan would be procured by RFFSA through international competitive bidding (ICB) in accordance with the Bank's guidelines on procurement, except that, for contracts of US$250,000 equivalent or less, which would be too small to attract foreign firms not already represented in Brazil, the award would follow local competitive bidding (LCB) procedures, which were found at appraisal to be satisfactory to the Bank; the related documentation is in the project file. The Bank-financed portion of purchases contracted under these procedures would not aggregate more than US$11.0 million, including contingencies. Local manufacturers are likely to compete for most item to be procured under ICB, and, since they are - 25 - often competitive in the world market, it is possible that as much as 50% of the orders to be financed under the Bank loan might be awarded locally. Local bidders would be granted a margin of preference 3/ by adding 15% (or the applicable custom duties, whichever is lower) to thi CIF value of the foreign bids. Civil works contracts of US$5.0 million or more would be procured under ICB; LCB procedures, which were found at appraisal to be acceptable to the Bank, would be followed for contracts less than US$5.0 million. Since the Brazilian construction industry is well developed, experienced and highly competitive, these contracts are expected to be awarded locally, although foreign bidders would have the opportunity to participate. All contracts for goods estimated to cost the equivalent of US$300,000 or more, and all contracts for works estimated to cost the equivalent of US$3.0 million or more, would be subject to the Bank's prior review of procurement documentation. Consultants for supervision of civil works, technical assistance under the various action plans, and training would be selected and engaged following the Bank's guidelines for the use of consultants. Aggregate consultant costs are expected to be about US$10.0 million.

F. Disbursements

3.21 The loan would be disbursed for: (a) civil works (stabilizationof cuts and embankments, improvement of drainage systems, siding infrastructure works, rehabilitation of superstructure, and installation of signaling and telecommunication systems) at the rate of 35% of the total costs, which is the estimated average foreign exchange cost component; (b) purchases of rails, switches and fastenings at the rate of 100% of CIF costs or, for the bids won by local manufacturers, at 100% of ex-factory costs excluding taxes (with the exception of about 7,000 tons of rails and 1,000 tons of fastenings which would be supplied by CVRDas part payment for assets purchased from RFFSA and used by RFFSA as counterpart funds for the project); (c) purchases of track plant equipment, track machinery, signaling and telecommunication equipment (excluding items to be financed under supplier credit), workshop equipment, and grain silo equipment at the rate of 100% of CIF costs or 100% of ex-factory costs, excluding taxes; (d) purchases of computer software at the same rates as under (c); and (e) technical assistance and training of staff at the rate of 50% of total cost. The period allowed for disbursement of the loan would be six-and-a-halfyears, consistent with the Bank's standard disbursement profile for railway projects in Brazil (Table 3.10).

3.22 In order to reduce the time period during which RFFSA would pre-finance the Bank's share of the project cost, the Bank would make advance payments from the loan account into a Special Account, to be opened in US dollars in the Central Bank. Funds from the Special Account would be available for financing only the Bank's share of the project cost. The amount deposited in the Special Account would be increased or decreased by the Bank as required for project execution, but would not exceed US$15.0 million. Withdrawals would be on the basis of Statements of Expenditure, showing the payments made by RFFSA; the supporting documentation would be retained by RFFSA and would be available for inspection during project supervision. On the basis of withdrawals made, the Central Bank, from time to time, would request the Bank to replenish the Special Account.

3/ A local bidder is a Brazilian firm (or a consortiua) offering goods containing components manufactured in Brazil and representing at least 50% of the value of the complete goods. -26 - g. Accounts *od Audits 3.23 RFFSAwould establish a Revolving Fund Account for the specific purpose of carrying out its obligations related to the project. The Account would be replenished with RFFSA's, the Government's and BNDES' (through RPFSA) contributions, and with withdrawals from the Special Account to reimburse project expenditures eligible for Bank financing. During loan negotiations, RFFSAconfirmed that it would: (a) as a condition for loan effectiveness, establish a Project Revolv- ing Fund Account in a suitable Brazilian bank and deposit into this account not less than US$2.0 million equivalent; (b) deposit an additional amountof US$2.0 million equivalent by March 31, 1986; and (c) make regular deposits to the Account to ensure the availability of sufficient funds for the project expenditures of the forthcoming month, according to work and procurement schedules.

3.24 RFFSAwould have full responsibility for documenting all project-related expenditures appropriately, and the Project Management Unit would keep the project accounts. It was agreed during loan negotiations that: (a) RFFSAwould continue to retain independent auditors, acceptable to the Bank, to audit its accounts, including the project accounts, in accordance with appropriate auditing princi- ples, and in such scope and detail as the Bank reasonably requests; (b) RFPSA would forward the annual audit reports to the Bank not later than five months after the end of the fiscal year; and (c) the Special Account would be audited by independent auditors acceptable to the Bank.

IV. UF 's F CL CIS

4.01 With the promulgationof the December4, 1984 PresidentialDecree, RFFSA, probablyfor the first time in its history,has the opportunityto operate as a commrcial entity, with clear corporate and financial objectives. The Government, by giving RFFSA operational and tariff-setting freedom, and responsibilities for the viability of operations and investments, expressed its commitaent to the financial rehabilitation of the railway. The railway's financial objectives,which would involvedebt control,fund generation,and targeted overall operational results, are gearedto attain the same goal; the PresidentialDecree provides the appropriateframework for the achievement. 4.02 Based upon the projected traffic, and taking into account the separation of CBTU, a financial forecast was prepared (in constant March 1985 values) for the next five years. Forecast assumptions are shown in Annex 4. The projections reflect the anticipated costs of future operations, including the savings resulting from the project investnent and from the various operational action plan. However, in order to assess the extent of the tariff/revenue actions that are needed, in the short run, to achieve realistic financial objectives, the projected revenues are based upon the existing (February 1985) tariffs with some expected adjustments to encourage unit-train traffic. The sensitivity of the forecast performance to changes in cost and to lower-than-expected traffic has also been tested (para. 4.09). 4.03 In the next five years, RFFSA'stotal operatingrevenue is expectedto increase,and, by 1989, it would be some 50% higher than in 1984. This increase is entirelydue to the enhancedimportance of freighttraffic. Duringthe next - 27 - five years, RFFSA should become a predominantly freight transport compauy with reduced reliance upon non-freight revenues and, what is more important, with diminishing subsidy-type normalization payments. In 1989, freight would provide 851 of the total operating revenues, while normalization payments would represent less than 121 compared to 2OZ in 1983 and 151 in 1984. In order to ensure that RFFSA's reliance upon normalization would reduce at a practical rate and to an acceptable level, the annual normalization payments, as a gradually reducing percentage of the total operating revenues, are targeted to reach no more than 121 in 1989 and would be kept decreasing thereafter through closure of not commercially viable lines and services (Tables 3.1 and 4.1). The limitation of the normalization paymence would facilitate the gradual reduction of the not commercially viable services. 4.04 Costs are also forecast to increase during the next five years, but at a lesser rate than revenues. In 1989, the working costs are expected to be about 25Z more than in 1984. In 1989, personnel remuneration (about 15X more than in 1984) would remain the mnst important single cost item, representing about 50% of the railway's working costs. By 1989, compared to 1984, the cost of fuel usage would increase by about 34Z, materials by 35Z, and the cost of contract work and other miscellaneous items by 411. These relatively modest cost increases reflect improved productivity (Table 4.2) and are some of the expected results of the project investment and of the various action plans to rationalize operations. 4.05 With revenues increasing faster than working expenses, the railway's cash-generating capacity would improve. The 1989 working income is projected to be over four times that of 1984, and the 1989 working ratio would be .76 (.87 without normalizationpayments), compared to .92 (1.08 withoutnormalization) in 1984. During the next five years, the railway'sinternally generated surplus would be almostequal to the value of its five years'investment program. To maintainits cash generating capacity, RFFSA agreed,during loan negotiations,to achieve annually reducing working ratios, with the 1989 target not exceeding.76, taking normalization payments into account.

4.06 Although RPFSA's cash generation would improve markedly, the operating losses would reduce only modestly because of higher depreciation charges. In the past, depreciation costs have been understated in the absence of asset revaluation and because of insufficient asset value indexing. By the middle of 1986, RFPSA is expected to complete the revaluation of all its fixed assets, and, as a result, the annual depreciation expenses would increase by some 801. By 1989, taking into account the results of revaluation and the value of the new assets commissioned, the annual depreciation would grow to Cr$ 1,280 billion, about twice that of 1984. As a result, the 1984 operating loss of Cr$ 433 billion is expected to reduce to Cr$ 318 billion in 1989. Also, the overall results of RFFSA's operation, including interest costs, would be considerably better than in the previous years. As a result of the Presidential Decree, the railway's debt obligations and the related interest costs, after 1984, would be restricted to nev (post-1984) borrowings, and, therefore, RFFSA's interest costs would reduce drastically, Im- proving the overall results. The 1985 interest cost would be Cr$ 4.5 billion compared to Cr$ 1,592 billion in 1984, and the 1989 interest bill (Cr$ 108 billion) would be only about 7% that of 1984. Because of the low interest expenses, the overallloss in 1989, Cr$ 197 billion,would be 801 lower than in 1984. The followingtable summarizesRPYSA's projected income statement; details are shown in Table 4.1. - 28 -

RSP - Projected Inc_ Statement (Cr$ blillion, Nmrch 1985 values) 1984 1/ 1985 1986 1987 1988 1989

Freight revenue 2,216.9 2,557.8 2,859.6 3,059.9 3,265.8 3,483.8 Other revenues 120.0 145.6 144.2 143.0 141.7 140.7 Normalization 403.6 536.5 514.8 501.3 491.0 482.0 Total Operating revenue 2,740.5 3,239.9 3,518.6 3,704.2 3,898.5 4,106.5

Working Expenses 2,522.4 2,728.6 2,785.1 2,878.5 3,012.6 3,144.9 Depreciation 650.6 875.4 1,129.8 1,189.1 1,246.5 1,279.6 Total Operating Expenses 3,173.0 3,604.0 3,914.9 4,067.6 4,259.1 4,424.5

Working Income 218.1 511.3 733.5 825.6 885.9 961.6 Operating Loss (432.5) (364.1) (396.3) (363.5) (360.6) (318.0) Net Non-Operating Income 27.2 20.5 19.2 20.9 21.1 21.3 Interest 1,592.3 4.5 22.1 45.1 76.0 107.5 Annual Loss (1,997.6) (348.1) (399.2) (387.7) (415.5) (404.2)

Working Ratio .92 .84 .79 .78 .77 .76

Normalization (as % of Operating Revenue) 14.7 16.5 14.6 13.5 12.6 11.7

I/ Pre-audit, preliminary figures.

4.07 During the next five years, RFFSA's financial position is expected to improve. About 48% of the total investment program (including the Bank-financed project) would be financed by funds generated from operation, 39% from borrowings, only about 7Z from Government capital contributions and 6Z from sale of assets. Since the Government has assumed the pre-1984 debts and would capitalize them as the annual debt payments become due, the railway's long-term debt obligation would reduce from Cr$ 16,348 billion in 1984 to Cr$ 6,700 billion in 1989, and the debt/ equity ratios would gradually improve from 56/44 in 1984 to 13/87 in 1989. How- ever, RFFSA will have to maintain substantial,although reducing, short-term borrowings (or bank overdraft)until about 1993. Because of the substantial fund requirements during the next five years, RFFSA's management should monitor the utilization of its financial resources closely. To maintain a sound financial position and, particularly, to ensure that borrowings would not lead, as in the past, to unmanageable debt obligations, RFFSA.confirmed, during loan negotiations, that: (a) during project implementation, in consultation with the Bank, it would develop, each year by October 1, annual projected fund flow plans, taking into account the next year's forecast operating and financial results, to establish the level of borrowing that would be necessary to finance the next year's investments; the annual borrowings, excluding the funds borrowed from the Bank for the project's implementation, should not exceed 65% in 1985, 50% in 1986, and 30% thereafter of the projected annual internal fund generations; and (b) after 1985, it would collect its receivables and settle its trade accounts within 45 days on the average. KFFSA's 1985-1989 projected Fund Flow Statements and Balance Sheets are shown in Tables 4.3 to 4.5. - 29 -

4.08 Although the overall financial results, even without further real tariff adjustments, are expected to be considerably better than in the past, RFFSAwould not be able to turn its overall losses to profits without additional tariff adjustments (or equivalent cost savings). It is estimated that a 12% increase in freight revenues (or equivalent cost savings) would enable RFFSA to completely eliminate its 1989 overall loss. However, since the tariff increases (10% effective February1985) that the railway's customers would have to absorb are substantial, it would not be reasonableto expectadditional tariff adjustments to achievefinancial break-even during the project's implementation, prior to 1989. Also, the cost saving impacts of the next five years'investments and action plans would be only partialbefore 1989. For these reasons,the earliestreasonable target date for financial break-even would be 1993, giving RFFSA three full years to implement further tariff increases if the project-investment, short-term tariff and marketing actions and action-plans-induced cost savings would not be sufficient to achieve an earlier break-even. During loan negotiations, RFFSA confirmed that it would introduceall the necessarytariff and/or operationalcost saving actions to ensure that, by the end of 1992, the total operatingrevenues (including normalizationpayments within the stipulated limits) would cover all the costs, includingdepreciation (based on the asset revaluation)and interest.

4.09 The sensitivityof RFFSA's financial performance to higher working costs, to increasesin projectcosts, and to lower-than-expectedtraffic has been tested. Since RFFSA is expected to adjust charges to maintainits financialtar- gets, the results are expressedas tariff increasesthat may be necessary to off- set adverse impacts upon finances. For example, if, in 1989, working costs were 15% higher than forecast, then 11% additional revenue would be necessary to achievebreak-even. Similarly,with 15% lower-than-expected freight traffic and no increasedcosts, the additionalrevenues would have to be 12%. A 15% increase in the projectcapital cost would requirean additionalrevenue of about 3%.

V. ECOUChEICJWALUAION

A. General

5.01 The Goias-MinasGerais corridor and the Paranacorridor projects form part of a broaderprogram for the rehabilitationof RFFSA'smeter-gauge network. In 1982-1983,RFFSA, with assistancefrom GEIPOT,carried out a comprehensive inventoryof track and other facilities on the entire network, identifying defi- cienciesand possibleremedial actions. The identifiedrehabilitation works and improvementswere then screened,through cost-benefit analyses, in order to establish networkwide priorities. This planning effort led to the design of the two corridor projects, which were found to be of the highest priority, as well as to the other rehabilitation projects which are included in RFFSA's investment plan for 1985-1989. Detailed feasibility studies, including appropriate economic evaluation, were prepared in 1984. 5.02 The investments included in the two projects are aimed at increasing the efficiency of mutltimodal-railway based-transport services in the two corridors. Specific objectives are to increase train operating speeds, particularly by remov- ing existing speed restrictions due to present track condition; to improve train formations and crossings, rationalize train operations and improve rolliug stock - 30 - productivity by consolidating intermodal transfer into fewer, more efficient terminals, operating more unit-through-trains and developing intermodal transport; to reduce operational delays and increase capacity on sections currently operated at, or close to, capacity; and to reduce operational delays and emergency maintenance requirements through improving the condition of infrastructure and track. These objectives (and the related economic benefits) would not be achieved through one specific type of investment, but through a mix of investments which includes infrastructure and track rehabilitation, an improved system of sidings for train crossings, improved signaling and telecommunications on high traffic density sections, and improved terminals and yards. Conversely, each specific type of investment would contribute, in varying degrees, to several of these objectives. The evaluation of the two corridor projects, therefore, focuses upon project investments globally, and upon particular items whenever possible.

5.03 The policy and institutional development component of the project has been designed to support the full implementation of necessary measures to gradually turn RFFSA into a commercially viable freight carrier. The justification of the various action plans, which together represent less than 2X of the project cost, was not quantified; qualitative justification is discussed in Chapter II.

S. Traffic

5.04 The major commodity flows in the corridor of Parana are grains and grain products, in particular soya, corn and wheat produced primarily in North and West Parana and in Mato Grosso do Sul, and shipped to the area of Ponta Grossa for processing or to the port of Paranagua for export or shipment to other regions in Brazil; and soya pellets produced mainly in Ponta Grossa and in North Parana and shipped to Paranagua for export. In 1983, RFFSA transported about 2.5 million tons of soya pellets in the corridor, which represented about half of the total transport demand for this product; the remaining demand was met by the trucking industry. RFFSA also met a substantial share of the demand for transport of wheat and maize. Its participation in the transport of soya grains has remained marginal, the main reason being the poor efficiency of the railway resulting from the condition of the track and from the lack of appropriate silo facilities upcountry. RFFSA intends, with the project, to maintain, at about 50X, its participation in the pellet market, which is expected to grow at about 5.6Z p.a. (in tons) until 1990, and at about 2.91 p.a. thereafter; it also intends to maintain its current share in the transport of wheat and maize. The proposed investments would enable RNFSA to participate in the transport market of soya grain from North and West Parana, and from Mato Grosso do Sul to Ponta Grossa, which exceeded 3 million tons in 1984. Petroleum products, alcohor, coal, cement and sugar are other important commodity flows in the corridor, with good development prospects. The demand for transport in the corridor and RPFSA's marketing plans and traffic forecasts are discussed in Annex 2.

5.05 The main commodity flows in the Goias-Minas Gerais corridor are: (a) petroleum products and alcohol, distributed in the region mainly by rail, from an oil refinery near Belo Horizonte and from the main alcohol-producing centeLs in the State of Sao Paulo; (b) iron ore, which is mined in Southern Minas Gerais and which, in addition to the large shipments on EFVI's line for export through Vitoria and for supplying the major steel plants in Minas Gerais and Tubarso, is supplied, mainly by road, to a number of smaller steel plants around Belo fori- zonte, and to pig iron producers in the area of Sete Lagoas, in North Minas - 31 -

Gerais; (c) other industrial inputs such as limestone from the Sete Lagoas area which is supplied to the major steel plants, charcoal produced in North Minas Gerais, and coal mined in the southern region and shipped through Vitoria mainly to supply the cement industry in the corridor; (d) steel products, pig iron and cement distributed in the corridor and shipped for export or to other regions of Brazil through the ports of Vitoria and/or Rio de Janeiro; and (e) phosphates mined in the eastern area of Uberaba, in the corridor, and partly shipped through Vitoria to chemical plants in other regions. Wheat imported through Vitoria and carried by rail to Brasilia and Goias has been, until recently, the only substantial grain flow. The extensive agricultural development currently taking place in the cerrados of Goias and Minas Gerais has been generating increasing shipments of maize and soya, mainly to the Sao Paulo area for processlng, and, more recently, for export through Vitoria. The prospects of the transport demand in the corridor and of RFFSA's participation are discussed in Annex 2.

Co Benefits

5.06 The sajor economic benefits which are expected from the proposed investments, and which have been quantified, are: (a) savings in train operating (and capital) costs, which would derive essentially from increased train operating speeds, in some sections from shorter crossing waiting times, and from improved train formations; (b) savings in terminal and intermediate yard costs through improved cargo transfer operations and increased utilization of unit-through- trains; (c) reduction in track maintenance costs, Including avoidance of deferred track maintenance and of continued track deterioration due to poor infrastructure cendition, and through increased mechanization of maintenance; and (d) avoidance of additional road transport (including truck operating and capital costs, and road costs) for traffic which, in the "without' project case, would be carried by truck as a result of limited capacity of the railway or of comparative advantage of road transport. Benefits from reduced wear, maintenance of locomotives and rolling stock, from other-than-transport components of the distribution costs, and from increased safety were not quantified.

5.07 In the Parana corridor, the proposed investments are expected to generate the following benefits. Average train operating (and capital) costs in the corridor would be reduced, by 1990, from an estimated US cents 2.0 per net ton-km without project to about US cents 1.7 with the project; major savings would be made on wagon and locomotive capital costs, and minor savings on diesel oil and crew costs. Average railway terminal operating costs in the corridor (including related rolling stock and locomotives capital costs) would be reduced from US$2.0 to about US$1.7 per ton. Additional road transport costs In the `without' project case were estimated at an average US cents 3.0 per ton-km, which includes an average US cents 2.6 for trucking costs, and US cents 0.4 for road costs. The net present value of the benefits from the proposecd investments Is estimated at about US$114 million equivalent, under base cost and traffic assumptions and for a discount rate of 12X; their internal rate of return is 24% (Annex 5).

5.08 In the Goias-Minas Gerais corridor, average train operating (and capital) costs would be reduced, from an estimated US cents 2.4 per net ton-km to about US cents 2.2 with the project. The average railway terminl operating cost would be reduced from about US$1.5 to about US$1.2 per ton loaded or unloaded. Additional road transport costs were estimated at an average US cents 3.2 per ton- - 32 - km. The net present value of the benefits from the proposed investments is estimated at about US$48 million equivalent, under base cost and traffic assumptions and for a discount rate of 12%; their internal rate of return is 18% (Annex 5).

5.09 The proposed investments in signaling and telecommunications, which are described In Annex 3, have also been evaluated separately. The economic benefits expected from the signaling system, to which a portion (about 30% in cost terms) of the telecommunications investments was added for the purpose of the evaluation, include reductions of train operating (and capital) costs on the controlled section resulting from reduced delays for train crossing, savings in staff at crossing stations, and benefits from increased line capacity, since, without the proposed investment, an increasing traffic would be diverted to the road. In the Parana corridor, the proposed signaling system for the Uvaranas-Paranagua section has an estimated internal rate of return of 35%; in the Goias-Minas Gerais corridor, the proposed signaling system for the Sete Lagoas-Costa Lacerda section has an estimated internal rate of return of 24% (Annex 5).

5.10 The economic benefits expected from the proposed microwave telecommunications systems, apart from their contribution to the operation of the signaling systems, are mainly reductions in the train operating and capital costs which would result from avoidance of traffic interruptions due to communication interruptions, from faster assistance to immobilized trains, and from improved management of wagons in yards. The proposed telecommunications systems for the Parana and Goias-Minas Gerais corridors have estimated internal rates of return of 33% and 17% respectively (Annex 5). RFFSA would also save an amount of about US$2 million annually on telephone and data communication charges from the public network.

D. Risks and Sensitivity Analysis

5.11 Although the traffic forecast upon which the economic evaluation is based represents a best estimate under present economic prospects, actual traffic could be lower if the economic recovery in Brazil and/or the international demand for Brazilian exports are below current expectations. Assuming that the demand for transport remains, during the period of analysis, 20% below the forecast, the Parana corridor project would have a rate of return of 21%, and the Goiao-linas Gerais corridor project 16%. Although project cost estimates are based upon detailed engineering designs, unexpected delays in project execution or changes in factor prices might lead to higher costs. If, in addition to the 20X lower-than- expected traffic, investment costs were 15%, and maintenance costs 20% higher, the Parana and Goias-Minas Gerais corridor projects would still have attractive rates of return, 172 and 13X respectively (Annex 5). The project, which essentially includes the rehabilitation or improvement of existing facilities, would not have any adverse impact upon the environment. - 33 -

vi. RSACHE AM -s SD_1011

6.01 During loan negotiations, agreement was reached with RFFSA and the Government on the following:

(a) arrangements related to CBTU's separation from RFFSA to be completed by the end of 1985, and RFFSA not to make payments or transfer revenues to CBTU unless provided for under these arrangements (para. 2.02);

(b) RFFSA to implement: (i) a program of closure of not commercially viable lines and services from mid-1985 to mid-1986; (ii) a program for rationalizing operations in the Northeast and each year reduce the region's operating cost by at least 2.5%; and (iii) a station closure program initially in the Parana and Goias-Minas Gerais corridors, to be extended subsequently to the entire network (para. 3.06);

(c) (i) RFFSA and the Government to establish and maintain administrative mechanisms for the closure of not commercially viable lines and services and for incentive-based normalization payments; (ii) annual normalization not to exceed stipulated levels; and (iii) the Government to guarantee minimum normalization payments in 1985 and 1986 (para. 3.07);

(d) KFFSA to: (i) recover working costs for wheat, soya, corn, fertilizers and cement by the end of 1985; (ii) recover working and administrative costs plus depreciation and interest on rolling stock for its 13 most important products by the end of 1986; (iii) upgrade its cost accounting by the end of 1986; and (iv) introduce a new tariff structure by the beginning of 1988 (para. 3.09);

(e) KFFSA to: (i) prepare an operations managea'nt master plan, present it to the Bank for comments by the end or 1985, and implement it thereafter; and (ii) implement a locomotive and rolling stock maintenance action program and a track maintenance action program (para. 3.10);

(f) KIFSA to: (i) implement a planning and management development action plan, including a management training ,rogram; (ii) regularly update its rolling investment plan through evaluation methods and criteria satisfactory to the Bank; (ili) refrain from undertaking any investment unless it is justified according to the agreed methods and criteria; and (iv) exchange views with the Bank on its investment and financing plans (paras. 3.11 and 3.12);

(g) the Government, through Mr, to undertake a transport coordination action program for the Southeast corridors (para. 3.13);

(h) appropriate organization and staff, satisfactory to the Bank, for project implementation, outline terms of reference for the action programs, and reporting requirements (para. 3.16); -34

(i) RFFSA's operational and financial targets (para. 3.17);

(j) project financing plan and the Governuent ' guarantee regarding the counterpart funds (para. 3.19);

(k) procuremnt procedures and guideli.2es (para. 3.20);

(1) disbursement procedures (paras. 3.21 and 3.22):

(a) RPMS to maintain a Project Revolving Fund Account with an initial deposit of US$2.0 uillion and an additional deposit of US$2.0 million equivalent by the end of March 1986 (para. 3.23);

(n) auditing arrangements (para. 3.24);

(o) RFFSA. to achieve annually reducing working ratios (para. 4.05);

(p) MFFS&'s annual borrowings not to exceed targeted levels, collection of receivables not to exceed 45 days, and trade accounts to be paid In 45 days on the average (para. 4.07); and

(q) RFISA to aim to recover, by the end of 1992, all the costs, including depreciation and interest, from operating revenues (para. 4.08).

6.02 Conditions for loan effectiveness would be:

(a) RPFSA. to put the organization plan and staffing plan for project implementation into effect (para. 3.16); and

(b) RFFSA to establish a Project Revolving Fund Account and deposit US$2.0 million equivalent into it (para. 3.23).

6.03 Subject to the above, the project provides a suitable basis for a Bank loan of USS200 million. The terms would he 15 years with a three-year grace period.

May 7, 1985 - 35 -

TABI. 1.1

.. A.IL

FEDUALRAnLUW - IORT CORRIDOR- MOJTCT

Federal Inweatmoets in tbe Trausport Sector, 1973-1984

a. in current Cr4 biios

Year Highways Railways Ports Shippi,g and Others Total Shipbuilding

1976 6.3 11.5 1.5 4.5 4.3 28.1 1977 8.4 11.4 1.7 5.8 4.2 31.5 1978 9.2 13.0 3.5 8.4 5.9 40.0 1979 20.1 17.6 5.5 13.3 6.1 72.6 1980 33.6 43.7 9.0 29.9 7.5 123.7 1981 63.9 77.0 13.7 59.9 17.7 232.2 1982 109.4 124.8 60.4 100.5 63.2 458.3 1983 228.6 335.4 93.9 261.2 174.6 1,093.7 1984 1/ 627.5 520.8 186.8 1,203.5 552.6 3,901.2

b. In Decoubher1984 Cr$ bIllioU 2/

Year Highways Railways Ports Shipping and Others Total Shipbuilding

1976 2,099 3,832 500 1,500 1,433 9,364 1977 1,962 2,662 397 1,355 981 7,357 1978 1,549 2,189 589 1,415 993 6,735 1979 2,199 3,019 602 1,455 667 7,942 1980 1,836 2,387 492 1,634 410 6,759 1981 1,663 2,004 357 1,559 461 6,044 1982 1,457 1,662 804 1,338 842 6,103 1983 1,196 1,755 491 1,367 914 5,723 1984 1/ 1,024 850 305 1,964 902 5,045

1/ Preliminary figures. 2/ Adjusted on the basis of the General Price Index (IGP).

Source: Ministry of Transport

April 1985 36 - TABLE 1.2

1mumZR

P L IANYm XoLTCROQ -B

PetrmlbR Aointivehut Yuel8: Price Structure and idjustmut a. Price Structure as of MNrch1985 1/ (in US$ per liter)2/ -

Gasoline "A' 3/ Diesel-Oil

Ex-Refinery Price (realization) 33.3 28.8 Distribution Charges & Retailer's Margins 14.0 3.6 Taxes 5.1 4.1 RetailPrice 52.4 36.5 Retail Price (Net of Distribution Charges and Retailer"s Margins) 38.4 32.9 InternationalPrice (c.i.f.Santos) 4/ 22.5 5/ 22.2

b. Aer ConsumerPrice IndexOver Genral priee index (DI)

Year Gasoline DieselOil

1973 .47 .65 1974 .72 .70 1975 .87 .78 1976 1.02 .82 1977 1.04 .93 1978 .98 .90 1979 1.00 1.00 1980 1.42 1.03 1981 1.40 1.22 1982 1.24 1.22 1983 1.15 1.24 1984 1.10 1.13

1/ Pricesfor the mouth of March 1985. 2/ Weightedaverage exchange rate for the period: US$1 - Cr$4,162. 31 73 RON gasoline,retailed in a blend of up to 20Z of anydrousbiomass alcohol (RON- ResearchOctane Number). 4/ As of the Third Quarterof 1984. 5/ 95 RON gasoline.

Source: Ministryof Transportand mission estimates May 1985 EAIL

rUoom UAIWA - Kg"= CouI - lWJaw T

IU#'saPIat a"d ProJectedTraffic, 19G0-M990 so Ia illoateas

Averi Ainu!lIncreases (Z) Cnm_dity 1970 1975 1960 1983 1964 1985 1986 1987 1986 1969 1990 1975- A0 197"44 x(4X)

Petroleum Producta 2.7 3.6 6.6 6.2 6.6 7.1 7.1 7.6 7.9 8.2 8.6 12.9 7.3 3.9 Alcohol 0.0 0.0 0.1 0.7 1.0 1.1 1.2 1,3 1.4 1.5 1.6 - - 8.5 Coal 4.0 5.0 7.9 10.2 10.4 11.1 11.9 12.7 13.6 1I'6 15.6 9.6 r.5 7.0 Iron Ore Export 0.0 9.1 14.2 9.0 12,4 12.9 11.5 14.0 14.6 15.2 15.9 8.8 3.2 4.2 Iron Ore Other 7.7 7.6 7.2 7.9 8.0 8.1 .f. 8.9 9.2 9.5 9.6 -1.1 0.6 1.5 Lt eetone 1.0 1.1 I.9 3.7 4.3 4.6 4.9 5.3 5.6 6.0 6.4 24.6 14,2 6,9 Steel Products 1.1 1.9 5.5 8.1 6.0 8.4 r.6 9.2 9.7 10.1 10.6 21.7 17.1 4.R Cemnt 2.2 3.0 1.6 1.6 4.1 4.3 4.6 4.9 5.1 5.4 5.1 1.7 1.5 5,. Pellets (soys) 0.7 1.6 1.0 4.1 4.3 4.7 5.1 5.6 6.2 6.7 7.4 13.4 11.6 9.4 Soya (been.) 0.4 1.0 1.7 1,7 1.9 2,1 2.1 2.6 2.9 1.2 3.5 11.2 7.4 10.8 Corn 1.2 0.2 0.7 1.2 0.1 0.7 1.0 1.2 1.4 1.7 1.0 28.5 4.6 7,0 Wheat 1.2 1.8 2.6 2.1 2.3 2.4 2.5 2.6 2.1 2,8 2.9 7.6 2.8 4.2 Fertiliter 0.6 1.1 3.4 2.7 3.5 3.7 4.0 4.1 4.6 4.9 5.2 25.1 11.7 6.6 Other 9.6 6.6 10.1 6.5 10.0 50.5 10.9 11.4 12.0 12.5 13.1 2.8 1.4 4.6

TOTAL 12.6 46.2 70.5 69.1 77.3 81.9 ^6.1 91.6 96.8 102.4 10R.2 8.8 5.9 S.8

b. l. billie toa-AI

A a aoAnnual Increases tX) Commodity 1970 197$ 1980 1981 1984 I/ 1965 1986 1987 1986 1989 1990 l975-R0 1975-84-1984-90

Petroleum Products 0.8 1.1 3.6 3.4 3.8 4.0 4.2 4.4 4.6 4.n 5.0 22.6 12.6 4.5 Alcohol 0.0 0.0 0.1 0.6 0.6 0.9 1.0 1.0 1.1 1.2 1.3 - - 9.0 Coal 0.4 0.5 1.0 1.13 1.4 I5. 1.6 1.7 1.9 2.0 2.2 14.9 12.1 7.S Iron Ore Export 0.0 6.0 9.0 5.6 8.0 86. Al7 9.1 9.5 9.9 10.3 8.4 3.2 4.1 Icon Ore Other 4.0 3.8 4.6 4.1 4.4 4.6 4.7 4.9 5.1 5.3 5.4 3.9 1.6 3.6 Limestone 0.3 0.4 1.0 0.9 0.9 1.0 150 1.1 I.Z 1.3 1.4 20.5 q.4 7.2 Steel Products 0.5 0.6 2.1 2.5 2.6 3.0 3.1 3.1 3.S 3.6 3.6 28.S 56.7 5.4 Cement 1.1 1.6 2.5 2.4 2.8 3.0 3,1 3.1 3.5 3.7 4.0 9.3 6.4 6.0 Pellets (Soya) 0.5 0.7 1.0 1.3 1.5 1.6 1.8 2.0 2.2 2.4 2.6 7.4 6.11 9.6 Soys (Beans) 0.3 0.7 1.1 1.1 1.1 1.4 1.6 5.6 2.0 2.2 2.5 9.5 7.1 1I.5 Corn 0.4 0.1 0.4 0.6 0.2 0.5 0.7 0.9 1.0 1.2 1.4 12.0 6.0 1.4 Wheat O.S 0.1 l.0 0.9 1.2 1.1 1.3 1.4 1.4 1.5 1.6 7.4 6.2 4.5 F.rtillger 0.3 0.5 1.2 0.9 1.2 1.1 1.4 1.5 1.6 1.7 118 19.1 10.2 7.2 Other 3.0 2.8 4.6 3.4 3.5 3.7 3.9 4.1 4.1 4.6 4.6 10.4 2.S 5.S

TOTAL 12.1 19.7 33.2 29.6 33.8 36.0 38.2 40.5 42.9 45.5 40.1 11.0 6.2 6.1

1/ Preliminary estimates.

Source: NFFSA and ioinon gstimatem.

Harch 1985 - 38 - TABLE 2.2

BRAZIL

FEDEARLRAILWAY - E R1MRTCORRIDOR - PROJECT

Summary of RFFSAs Costs and Tariffs and Truck Tariffs, 1984 1t 2/ (in September 1984 Cr$Iton-ku)

Marginal Cost Working Total Tariff Short Term Medium Term Cost Cost Rail Truck

Petroleum Products 19.1 33.6 47.2 64.2 53.3 70.3 3/

Alcohol 19.1 33.6 47.2 64.2 44.2 70.3 3/

Coal 14.7 34.1 36.3 50.1 64.8 131.2

Iron Ore 4/ 8.5 20.0 22.2 28.5 21.5 51.5 3/

Iron Ore 9.2 21.6 22.9 31.3 28.0 46.2

Linestone 17.0 33.5 40.7 55.9 43.5 87.9

Steel Products 18.4 29.8 35.2 48.8 39.5 96.5

Cement 14.9 29.8 35.9 49.6 28.8 48.6

Pellets 15.9 36.3 35.5 49.7 37.4 61.8

Soya 18.7 41.0 44.7 62.7 33.0 81.3

Corn 18.7 41.0 44.7 62.7 33.0 81.3

Wheat 17.5 32.1 38.1 52.3 37.1 67.2

Fertilizer 17.3 31.5 35.1 49.0 26.2 83.4

1/ Short term marginal cost is the variable portion of working (cash) costs; - medium ternm marginal cost includes short term marginal costs, appropriate administrative cost plus depreciation on rolling stock; working cost is the total cash costs excluding depreciation; total cost includes depreciation and (notional) interest cost.

2/ Cost estimates are based on 1984 freight traffic and 1984 projected costs; truck tariffs are September 1984 published rates.

3/ Theoretical only.

4/ NBR contract.

Source: R.FlSA and mission estimates.

March 1985 - 39 -

UAUL.

OMi LAXWAY Z-FO CRIf - FWJUCT

311lsM Operation Stattat1ca, 1979-1983

1979 1980 1981 1952 1983

Total Route (ko) 0.76 a 202 202 202 202 13 Metric 21,914 21,592 21.188 21,068 21,212 Broad 1.781 1 797 1,781 1 817 158 Total 23,897 23,591 23.l71 23,087 23,no

Total Staff (000) 94,959 89,420 88,325 84,632 82.952 Traffle Passenger - numbers (000) Suburban 321,940 356,065 368,982 381,591 615,737 Interior 13.998 13.799 14,542 14,323 12.819 Paseqger - km (million) Suburban 7,135 7,893 8,296 8,795 9.607 Interior 1,611 1,567 1,722 1,591 1.426 Freigt Tons (000) 60,921 70,760 67,856 69,828 69.7J4 Tos-km (million) 27.689 33,260 31,087 31,687 29,633 TraLink (000) Passener-suburban 13,895 14,401 15,175 15.697 16.015 Passenger-interior 9,273 8,842 8,303 8,394 '.OSI Mimed 2.898 2,827 2,516 2,366 1,401 Freight 31,298 33.961 32,622 31,689 28.709 Diesel 29,969 32,546 31,284 30,431 27.558 Electrlc 659 677 609 566 533 Steam 670 738 729 692 617 Service 3728 3,322 3,008 2,961 TOTAL Train-km 61,T232 63353 61,623 61,29 56i

Total locomotive-km (000) Diesel 79,313 83,036 79,168 78,301 73.506 Electric 2,521 2,808 2,773 2.543 2.145 Stea" 999 1,150 1,103 1,082 861 Carros motores 30.603 30,523 30,045 31,923 33.375 Automotrizes 509 499 471 4 6 252 TOTAL 113,94$ 118,016 113,560 114,317 11D,j m__

Freight (revenue-earning) Wagon-K (tdillion) Loaded 536.4 606.4 585.4 590.8 542.5 Empty 426.2 491.3 447.5 453.3 426.9 TOTAL l2.i6 1.OS7.7 1,04.1L5.. - - of which] railway wagons 830.6 969.3 918.5 889.8 834.0 I private wagons 132.0 128.4 114.4 154.3 135.4

(ContinUed) - 40 -

TAMlE 2.3 Page of 2

nIDIL EAUIAT - WAIT CWRDUO - FEWU

UPPIA's Operatt StkteLatica. 1979-1983

1979 1930 1981 1982 1983

Gros. TralLing Ton-Km (mllilon) Passenger 7,700 7,911 8,067 8,428 8,378 Freight. revenue-.arning 46.668 54,535 50,286 52,396 49.954 SarvIce 1299 1 139 0 941 0.949 1.OIS TOTAL 11J3V5, 77r 59f34J

Grcoo Ton-Km (Includtng iloco) - (billion) Pameanger 8,885 9.509 9.171 9,410 9.230 Freight, revenue-earning 54.242 65.190 57,314 55.739 52,862 Service 1 494 1.596 1 249 1 247 1 303 TOTAL 6Tr 76.295

Locomotives in Stock DleseL 1,487 1.511 1.536 1.594 1,628 Electric 65 82 81 58 53 Stes 44 45 43 40 40 -Motor cars 432 426 460 502 516 Autootive 26 26 26 27 24 TOTAL !UT 2.146 2flT

Freight Wagon mnd Train Performance Percentage Loaded to total wagon-km 55.7 55.6 56.9 55.2 56.1 No. wagon Loaded 42,242 43,662 43,479 42,53B 43.051 lagon-days in use (000) RaLlvay-owned wagons 14.351.8 14,867.2 14,777.0 14,367.8 14,431.4 Prlvate wagons 1 066.5 1 069.4 1 092.8 1 158 5 1 282.2 TOTAL 15,418.3 15,36. 1%869.8 15S,526:3 15T.713.6

Average Wagon Loed (tons) 57.7 54.0 51.9 50.6 55.0 No. of Wagons Loaded 1,055,641 1,315,242 1,277,891 1,520,312 1,466,986 Wagon-km per egaons-Dy in Use 62.4. 66.9 65.1 67.2 b1.7 Not ton-km per Wagon-Day In Use InclusLve 14BR 1,796 2,087 1.959 2,040.9 1,885.8 Exclusive KRI 1,432 1,581 1,544 1,609.1 1,557.0 Wagon Turnaround (days) Inclusive MBR 13.1 12.4 IZ. 12.2 14.6 Exclusive NOR 13.5 13.0 12.8 12.6 15.4

Wagon-km between Turnaround 816 651 8am 822 758 Average No. of Wagons per Freight Train 1oaded 16.1 16.9 17.1 17.3 18.3 Empty 12.8 13.7 13.0 14.1 14.4 TOTAL 2M I3. 30.1 31.4 32.7

Source: RFPSA

March 1985 BRAZIL

FIOBRALRAILVAT - WILT CORRIDOR- PRWECT

RfSA'. DieselNative Power, 1984

TIAN 56. St 55 56 51 5I 59 14 it Ia 43 66 65 66 61 W 69 N It It 15 t 16I 156 7 Ni n Of 63 1 151141

16171 6 531

U Ill 64 5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9 it

Al 696

515 ~~~~~~~~~19 19

gits is 6

612 Is 36 36 36 is II isU Ins0 59 If 55 It izi 652(5 I a It3 621(3 i I I3 1os6 25 i6

ISIS.? 36 36

iisle of S Is 36 I Islit I is its71 6s6 5 9 67 5 I I 79 In9 IS 135 S 16 61 S S 13 3 65 VW

Source: RFFSA

March 1985 UUAZIL

FEDIAL RAIWNAT- 511 a_lAtE - FR.Jf

Esthates of LUfe Cycle ato for bInufactured ve. EU Locomotive -(i Ul 'Tom eqIvalmt)

------Remanufacture I/ N------Purchase Discounted 3/ Discounte 3d Year Remnufacture Fuel Avait- Equivalent Purchase Fuel Avalt- Equivalent & Maintenance Saving j Tot4l ability Cost * Kaint. Saving 3 Total abillty Coat.

1 480.0 - 480.0 0.84 4,571.4 1,000.0 - 1,000.0 0.86 1,142.8 2 27.3 IS 12.3 0.84 13.1 24.9 20 4.9 0.86 5.1 3 27.8 15 12.6 0.83 12.2 25.4 20 5.4 0.85 5.0 4 28.3 IS i3.3 0.83 11.4 25.9 20 5.9 0.85 4.9 5 26.7 is 13.7 0.82 10.6 26.3 20 6.3 0.84. 4.8 6 29.2 15 14.2 0.82 9.8 26.8 20 6.8 0.84 4.6 ' 7 29.7 15 14.7 0.81 9.1 27.3 20 7.3 0.83 4.4 * a 30.2 15 1S.2 0.81 8.5 27.6 20 7.8 0.83 4.3 9 30.7 15 15.7 0.80 7.8 28.3 20 8.3 0.82 4.0 1t 31.1 IS 16.1 0.80 7.3 2867 20 6.7 0.82 3.6 11 31.6 IS 16.6 0.79 6,7 29,2 20 9.2 0.81 3.6 12 32.1 IS 17.1 0.79 6,2 29.7 20 9.7 0.81 3.5 13 32.6 is 17.6 0.76 5.8 30.2 20 10.2 0.80 3.2 Residual value (150.0) (34.4) (650.0) (114.6) Total 645.5 949.4

1/ Average costs, as of December 1984, for a G12 model. / As . .paredto non-remanufacturedlocomotive. 3 At a 12Z dLsacount rate.

Source: RFFSAand mission estimates. March 1985 I EMIL

I1AL 3*1111*-IliUf - l - umary of OU'S KOtel We_e1m _i rts. 135196

1960 1981 1962 1983 1984 1985 1966 1987 19U 1989

A. lotal FreightTraffic (billion ton-km) 31.3 31.1 31.7 29.6 33.8 36.0 36.2 40.5 42.9 45.5 *. TotalDiesel Freight Traffic (billton too-km) 32.5 30.1 30.9 28.9 32.1 35.1 37.2 39.5 41.9 44.5 C, AverageTrain Load (tons) 640 696 925 678 969 967 992 1,065 1,113 1,144 D, Totaltrain-gm, Diw.l (million ki) 36.6 33.6 33.*4 32.9 31.1 36.1 37.5 31.1 37.6 36.9 a. AverageNo. of Kcooper Train 1.60 1.73 1.67 1.66 1.67 1.65 1.70 1.77 1.60 1.14 *F TotalLoco-Km (million ki) 61.9 56.S 55.6 54.6 56.1 60.0 63.8 65.7 67.7 71.4 0, Ne. of Freighttao.e 979 978 1,034 1,0I0 1,060 1,096 1,094 1,092 1,090 1,067 N. AverageAnnual Mileage ('000 ke p.e.) 61.2 59.6 54.0 50.7 S2.1 54.6 56.4 60.2 62.1 65.7 1. Faoductlvity(mlllon rt too-kmp.a.) 33.2 31.0 29.9 26.6 30.3 32.0 34.0 36.1 36.4 40.9 J. Aval1ability (3 of time) 0.82 0.76 0.77 0.10 0.10 0.81 0.62 0.63 0.64 O.6S K. Utili"tioeof Availabli{ty(2) !/ 0.65 0.57 0.57 0.60 0.60 0.61 0.62 0.63 0.64 0.65 L. lb. of Loces to be Retired 24 26 a .20 6 t of uhich Freilght 1 2 2 2 3 5b1tch 23 24 6 16 3 tl, No. of tocemto be Transferredto Switch 23 24 6 16 3 , Neo.of totcs to be Purchased 23 24 6 is 3 0. Fr""esr Iomes 106 [Os 102 62 s0 60 30 76 73 73 r, OtherLocomti,es: 424 453 458 466 8 8/ 32 362 332 32 162 of which$ Service Tralns 170 164 164 164 164 164 Seteih 216 218 218 216 216 216 Q. Totol INdor of Ioos I,SII 1,536 1,594 1,628 1,627 1,556 1,552 3,546 1,543 3.516

11/ VUlAchanged the definition of utilization from 1981 to improve central of fuel consumption. / 79 loce were tresfrtred to CM in 1914.

ree M1AUsttatitic$ and planning Departmets, and mission etii"tm. March 1965 IRAZIL

-EDERAL RAILWAY- EXPORTCORRIDOR - PROJECT

RFFSA's Rolling Stock, 1984

TYPE FLAT CONDOLA BOX CATTLE TANK HOPPER OTHER TOTAL .EV'f N.R REV N. REV REV N. RV REV N. EV REV N. REV REV N. R _EV N.MV REV N.V YEAR

PRE 1950 554 623 803 551 1,611 1,111 364 210 37 2 90 139 3 3,683 2,415 1950 6 4 174 7 131 0 1951 46 5 1 1 15 2 If 3 7 80 II 1952 14 32 23 6 2 - 61 16 1953 2 1 6 1 9 1 1954 2 389 1 213 418 9 7 666 3 1955 54 47 297 1,431 15 143 3 1 1,92A 63 1956 13 6 443 1 258 65 1 115 4 783 123 1957 181 124 450 178 428 114 4 4 1 11 3 1,081 417 1958 58 2 70 6 212 110 450 8 1959 27 5 36 128 1 155 42 1960 11 1 4 is. 1 1961 14 84 3 1 99 3 1962 296 4 4 3 2 298 11 1963 23 36 173 51 8 11 6 253 55 1964 5 1 412 532 6 5 53 954 60 *- 1965 24 218 10 153 3 395 13 4 1966 8 204 5 4 217 4 1967 35 44 95 328 3 7 4 48 469 95 1968 126 1 38 70 2 1 1 235 4 1969 6 43 15 7 621 3 2 679 18 1970 8 3 1 4 624 16 43 1 693 7 1971 232 132 6 1 111 1 476 7 1972 349 10 151 820 4 163 936 140 2 2,421 154 1973 6 6 1,708 301 3 58 309 18 460 7 11 2,842 45 1974 396 108 1,448 323 1,952 321 1975 960 17 600 284 45 200 50 2,089 67 1976 818 10 1,847 10 2,540 8 386 244 67 5,843 87 1971 299 1 1,089 1,209 185 933 3,715 1 1976 66 340 930 165 556 43 2,057 43 1979 120 510 904 329 410 2,273 0 1980 220 350 196 24 190 980 0 1981 50 50 0 1982 150 250 190 590 0 1983 165 220 250 .635 0 TOTAL 4,411 907 11,282 873 13,976 1,270 1,055 8 2,859 83 5,545 835 189 121 39,317 4,097

I/ Revenue wagons. /t Non-revenue vagons.

Source t RFFSA

March 1985 IUDURALRAILWAT - ExPORt CORRIDOR- PmoJECr

Summir7 of UFSA'. Freight Wagon 4equirem_ts. 1985-1969

------Actual------F-orcst---- 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

A. Total FreightTraffic (billionton-km) 33.2 31.1 31.7 29,6 33.8 36.0 38.2 40.5 42.9 45.5 B. AverageWagon Load (ton) 54.0 50.2 51.9 50,6 55.0 55.5 56.0 56.5 57.0 58.0 P. C. No. of WagonsAvailable 39,005 39,616 39,608 39,108 39.177 39,722 39,712 39,726 39.765 39,831 D. Availability(Z) 89.7 90.0 90,7 90.7 91.0 91.0 91.0 92,0 92.0 92.0 E. Total LoadedWagon-Km (million) 615.1 619.6 610.8 585,4 608,5 648.2 680,8 715.5 752.6 785.2 F. AverageLoad Factor(Z) 55.6 56,9 55,2 56.1 54.7 5S.2 55,4 55.5 55.7 55.9 G. Total Wagon-Km(million) 1,106.3 1,088.9 1,106.5 1,042.9 1,112.4 1,174.3 1,228.8 1,289.2 1,351.2 1,404.6 M. AverageAnnual Mileage (km) 34,018 32.740 32,667 30,916 32,376 33,215 33,945 34,675 35,405 36,500 1. Productivity(net ton-kmper wagon) 852.7 784.7 800.0 757.7 854.5 '05.8 960,1 1,017.7 1,078.8 1,143.5 J. No. of Wagons Retired - - - - - 201 1,094 1,802 1,486 1,418 of which: Revenue Wagons - - - - - 201 656 1,081 892 851 Non-RevenueWagons ------438 721 594 567 K, Wagon Purchases - - - - - 799 1,084 1,342 1,529 1,490 L. No. of Wagons Transferred to Non-Revenue ------438 721 594 567 M. Total No. of Wagons 47,570 48,110 47 611 47 541 47 149 47 747 47 737 47,277 47,320 47 392 Revenue - RFFSA 40,948 41,080 40,163 3.59i 3:17 V9iii 34,9W0 39,445 394 39,860 - Private 2,536 2,938 2,629 2,955 3,735 3,735 3,735 3,73S 3,735 3,735 Non-Revenue 4,086 4,092 4.272 4,423 4,097 / 4,097 4,097 4,097 4,097 4,097

1/ Excluding wagons transferred to CBTU.

Source: RFFSA Statisticsand PlanningDepartments, and missionestimates. Harch 1985 I - 46 - ,tAN 2.9

INMALFAI - m0m M

RI% Jisnm 1901 (- DP C$ 1 HI)

1zuinm.t Prgras 1980 1981 1982 1983 1984 Ttal Z

1. RuAbtitata of Matric Gauge Newo& 169 113 112 103 66 563 11

2. Iqxoven= of Catri Lim/Sao Pado Buicdh 131 81 22 25 11 270 5

3. Catt1i cf Peax do Ago 538 492 380 182 68 1,660 33

4. Pardum and RAhaL11tatia of 1ocuwc±vus 174 263 39 12 74 562 11

5. Parduand ttxhrrdzatia ofWas= 65 5 43 54 34 20 4

6. IspraqEiu. of Shrwb. Cbu er System 441 373 366 292 281 1,753 35

7. otiu 10 8 7 11 15 51 1

WmZAL 1,528 1,335 969 679 549 5,06 10D

Ind= ( 0bmiIn 1980) 100 87 63 44 36

So : RSA, Plazxdt I .atmiu.

Mirh 18 L74 - TABEU 2.10

1 L5mM3IL& 1 - 0t IOIt - N

WIlL'lmteUla.IS-

OESCRIPrION 1985 1986 1987 1988 1989 TOTAL

GROUP I INVESTtlNTS 15.2 104.7 140.3 130.3 50.2 550.7

A. Metric Came Network Rehabilltation Progra 46.6 92.1 137.1 129.7 49.8 455.5 1. Parana Corridor ji STEI 35 9.37 CT5 ": 1T.T 2. Golas-MinasCorridor j 13.5 31.9 56.6 55.3 22.0 179.3 3. Rio Grand do Sul Network (Phase 1) 7.2 10.5 6.0 4.7 - 30.4 4. Bahta Network 6.4 9.9 7.5 4.3 - 30.1 S. Others 0.9 0.5 0.3 - - 1.7

1. Broad Gauge (Central Line Civil Works Consolidation) 1.2 0.8 0.1 - - 2.1

C. Motive - Powr and Rollinx Stack 70.8 6.0 - - - 76.6 6. Re-engining/Overhaul of 64 Locos and Parts =TI . - - - 7T 7. Purchase of 20 Locos and Parts 33.1 -- - 33.1 S. Purchase of 300 a1goes 16.6 - - - - 16.6

0. Others 6.4 5.8 3.1 0.6 0.6 16.3 9. OIS/IIS Development (SICO I) 7 2.i - - .0 10. Technical Assistance and Training 1.7 3.0 1.6 0.6 0.4 7.3

GROUP II INVCSTMES 13.0 37.5 67.3 46.3 31.1 IS.2 e. Broad GaCue Network Progra-m 2.8 10.2 11.4 4.0 - 26.4 11. Terminals and Yards 0.9 4.6 2.1 0.5 - 1T1, 12. Signaling and Telecomuinications 1.9 5.4 9.3 3.5 - 20.1

F. Motive Paver and lollinng Stock 10.1 22.6 30.0 20.0 20.0 t03.0 13. Remanufacture/upgradLng of Locos 6.0 14.0 2o.0 1 120.0 2 0. 1_. Rnhabilitation/jModrniaatLon of Wagons 4.2 5.8 10.0 - - 23.0

G. Others - 4.5 25.9 22.3 11.1 61.6 IS./IIS/MISDevelopment (SIGO II) -i 2.T 11Z.T S0 ** .v 16. Vorkuhops UpgradinglRoorganizatlon - 2.5 13.9 6.3 1.1 23.1 GRP III IEVESTMEITS 26.6 105.9 109.0 101.2 64.4 427.1

K. Metric Cause NetworkRehabilitation roam 1.5 2.2 7.1 12.5 19.2 42.5 17. Rio Grande do Sul Netwotk Phas Il) - - - 2.9 7.2 10.1 18. Northeast etework (Safety Projects) 1.3 2.0 3.5 3.5 I.S 11.8 19. Dauru-Corumba - - 1.4 S.1 4.S 15.0 20. Others 0.2 0.2 0.2 1.0 2.0 3.6

I. BroadCaq-l NetworkProgram - - 1.5 4.3 6.4 12.2 2I. Sao Paulo Line (Infra StablILzation) - - I.S C3T . T

J. Ferrowia do Aco 25.1 27.9 20.1 9.9 - 63.0 22. InfrastructurelSupers:ructure - - - - 5; 23. System 24.6 27.9 20.1 9.9 - 82.S

K. Motive - Power and RollingStock - 75.5 80.3 74.5 53.6 289.4 24. Pfrchase of 51 Locos *1i7 1 17.5 *i5 7E.6 25. Purcbaseof 4.020 wagoas - 55.1 63.3 57.0 39.4 214.6

TOTAL 164.8 248.1 316.6 277.5 165.7 1.173.0

Includingphysical and price concingaecie. excluding TA which Is hwmnas Item 10.

Source: EmSA and MiUon Zstimate waelh 198S - 48 TAILE 2.11

Sgm

FDULAL RAuIA - ePORT CuIDOt - PROJ=

E1115A Iuaimet Fluaaciua lan (1955-1989) (us1 Million)

S 0 U R C E S O F FU N D S

D E S C R I P T I 0 N Public UNDES& External Total Resources FINAHE IBRD Finance RFFSA

GROUP I - INVESTHENTS 550.7 55.6 121.6 190.0 61.7 121.8

A. Metric Cauge Network 455.5 49.3 102.7 186.0 7.6 109.9 1. Parana corrtdor 214.0 31.4T 3 T0.0 -7Ti;S 2. Golan-Minas Corridor 179.3 10.8 22.0 88.8 1.7 56.0 3. Rlo Grande do Sul Corridor 30.4 5.0 22.7 - - 2.7 4. Bahia 30.1 2.1 28.0 - - - S. Others 1.7 - - - - 1.7

B. Broad Gauge (Central Line Civil Works) 2.1 _ _ _ _ 2.1

C. Motive Power and Rolling Stock 92.9 6.1 14.9 - 54.1 1.7 6. Reenginng of 84 Locw77 6.1 - - 21.0 - 7. Parchase of 20 Locos 33.1 - - - 33.1 - 8. Purchase of 300 Wagons 16.6 - 14.9 - - 1.7

D. Others 16.3 0.2 4.0 4.0 - 8.1 9. OIS/MIS Development (SIGO I) 9.0 - 4.0 - 3-7 10. Technical Assistance & Training 7.3 0.2 - 4.0 - 3.t

GROUPII - INVESTMENTS 195.2 - 28.4 - 39.0 127.8

E. Broad Gauge Network Program 28.4 - 28,4 - - - 11. Terminal and Yards 8.3 - 8.3 -- 12. Signalling and Telecomnications 20.1 - 20.1 - - -

F. Motive Power and Rolling Stock 103.0 - - - 13.0 90.0 13. Remnufacturing & Upgrading of Locos 80 133 0 ff 14. Rehabllitation & Modernization of Wagons 23.0 - - - - 23.0

C. Others 63.8 - - - 26.0 37.8 15. OISXIS Development (SIGO II) 40.0 - - - 16.0 24.0 16. Workshop Upgrading/Reorganization 23.8 - - - 10.0 13.8

GROUP III - INVESTMENTS 427.1 24.4 178.8 - 120.0 103.9

R. Metric Gauge Network 42.5 24.4 16.0 - - 2.1 17. Rio Grande do Sul (Phase II) 10.1 2.0 6.0 - - 2.1 18. Northeat Netvork 13.8 13.8 - - 19. Bauru--Corumba 15.0 5.0 10.0 - 20. Others 3.6 3.66 - -

I. Broad Gag Network 12.2 - 6.6 - - 5.6 21. Sao Paulo Line 12.2 - 6.6 - - 5.6

J. Ferrovia do Ao 83.0 - 83.0 - 22. Infra and Superstructure 0.5 - - - 0.5 - 23. System 82.5 - - - 82.5 -

K. Motive Power and Rolling Stock 289.4 - 156.2 - 37.0 96.2 24. Parch"e of 51 Locos Z5 -- - -37T 077 25. Purchase of 4,581 vagons 214.8 - 156.2 - 58.6

TOTAL 1,173.0 80.0 328.8 190.0 220.7 353.5

Source: UPYSA and Mission Estimates

March 1985 -49 - l7uT 3.1

TEM Rnmw - RE OmaM - P2Dcr

J5M1 --. mtimm1 U_A z1fi_Thrwu Lgf8-Lqm

PeEfozane Tmrgets 1985 1986 1987 1988 L989

A. Qeraticmal Targs

1. Nmber d Staf (in '00Ch, at yew enl) 69.5 683 68.0 685 69.1 2. FreIght loccxtive AvilabUitY (Z) 81 82 83 84 85 3. YreIgt Iocawtive Utiliation (X) 61 62 63 64 65 4. FreIgt iocmatiue Mileaa ('000 kmpa.) 54.8 58.4 60.2 62.1 65.7 5. FreIght Iocaa,tive Prluctivity (millon net ton-Io Pa.) 32.0 34.0 36.1 384 40.9 6. freigt WgonAvailability (Z) 91 91 92 92 7. F-eght Wag:x Mileaw ('000 km p.a.) 33.2 33.9 34.7 35.4 36.5 8. WM=nT iurnaramdTim (e dXg MR. ¶fraffic, in days) 8.1 8.0 7.9 7.8 7.7 9. back Rehabilitation, 'km 111 287 477 477 23

B. 1nrncil T

10. WozldrzgRatio (with nuzation, %) 84 79 78 77 76 11. Ma2dn Nobnmizatim as a 2 of Total Operatir Reve 16 15 14 13 12 12. Mdumi of od. as a % Internaly Gemte Fundsl/ 65 50 30 30 30 13. CoUecimn of Acounts Receivbles (days) 45 45 45 45 14. Pay.ts ofdle ArComts (days) 45 45 45 45

1/ Famludixg Bank loan.

Sawre: RFESAandl mssion estimtes.

March 1985 - 50 -

TAKLE 3.2

BRAZIL

FEDERALRAfMAY -IEPORT CORRIDOR-PROJECT

Project Cost Sumry 1 (US$ '000)

Phyical RAILVAYPOLIC tIGIAS-MM Cemu aiuies INSTITUTIONALSERIS PARAN- DEVREIET CoIDOR CMRRIDORTotal z mouwt ---- =3 = . _= -- = ~

1. weSTENTCOSIS

A. CIVIL .59206E - 86i13 145,519 9.9 14,390 S. NATERIALS - 41,8 36,310 78,209 4.1 3,213 C. E UIT - 3?9666 43P167 02Y83 7.1 ,9no D. SWTVME 14012 - - 19012 10,0 101 E. TECHICALASSISTAN 3u877 1432 29009 7319 9.6 706 F. TRAININOF PR NL 1,114 - - 1,114 10.0 111

TotalINWESTIN COSTS 6,003 142P203 167799 3164004 7.7 24,431

Total &SELE COSTS 6003 142,203 167,799 316,004 7.7 24,431 PhiAcal CmUtr:in 600 9,96 13963 24P431 0.0 0 Price Cntinimnes 673 27?085 32,320 60,079 7.3 49400

TotalPROJECT COSTS 79276 1799256 213,9M2 400,514 7.2 2B9830 m_======3= = Tans 1O3 24i676 29v52B 55,235 7.2 3994 ForeignEcharie 3,105 979424 109t257 209,786 6.8 14,350

1/ Based on targetedfour-and-a-half year implementationschedule.

Source: RWFSA and missionestimates.

May 1985 IUWJ.L RAILWAYV- EMOT COhRhDO- IUOJCT

Policy and Institutional Revelo.at Comonanout- Coot Table

*m&dm of Tel.! led.oCut 924 04011 Fumotu,, swiflulli I.,.~~~~~Bcosts Tdals 1w2f1rle CmtleUeeln LeSl ft4. - -- t~~~~~~~~Excl,hMinI Wt fog'-. lao. Amme uiMt 191It 190917 2Igo 191 TsuiS IRa'. cutS1316 l I"?ipi 0 111 TStUI 515 1 11101 1131919 To; Pta "I ti.TmOTome Totai 941 W.gaTmx IoAW 06et

A. CIO-Y10 CT29KLM

-29UMAIttm W MMAIATM115F13m NW4H@17 12 24 12 - 4 2.1 30 i2 30 121 34 .72 39 144 24 0 22 144 0.204.5 *,ll to -291LEMATOflW LINE (LOA IN 9030 FI-#InN - 1 I- :4 652 015 TO *EUWTFTAT2WINLM PUWA 961lUA 12 24 4- 2 2, 6 It -106 14 12 I9 -- 22 31 I59 5 .105 ,2 TO

5*-Toal CfTlNl-M ACIUMONKM 61 121 46 23M 41 144 W IN-27 6? 162 40 220 0. C06T-CCWiINISTMU! WSN2MI ACTISEKM

-WMINU WCWT-AOCWIITM NA-NMl1 40 40 -. -3. 3 121 121 - - - 243 135144 --- 279r 70 2l7 42 219 0.1 $.a 4.25 TO 4M4tUAt1U6MESM M*41111144040 - - -6 3 I21 125 --- 43 In 144 . . . 279 70 16? 427 V 0.20.250.1 to -S1111210TSUNUWMCOI"O IM*410151 4020 ---. . 4 262 01 - -- -2 243 60 Pi --- 27 6 a495id 41274 0.20..5 0.15 TO *NS2USISWINTTSUWEMTMUV91-151722040-- 60 3 6152 - - -2 4024 ------135_ 2252.0. 05 T

5-oWl CUT-AMI1M TftIF NO5NTIM OCt1NKMU 444 445 - - - 91 19 527 .-V - 1,046 261 in 1I? 5.04A C. PWPTIININO MSIIUUU ACTION KM

-EP. I INPLUWWT2U0WAiMM IO PMt N-MMI 26 24 12512 - 4 0.5 29 54 97 97 -6 0 1n212 10242134- 613 404 34 1222152 0.50Its 0,5 TO -KW" IP.t5MILLAT1U0FSW1r U 2 5 I - - 20. 201.2 202 34 304 - -1,25I2 226 199 317 - - WTI5 970 521 121 1e.25 0.2 0.0 tot W -99.VIUEACSSCAT2ISUSmmKM 961-NUAU4 91 - -- 13 I.2 20 46 . . . id 23 54 . . . 76 27 M0 1 760off0.51 0.15 TO *E55I2NIIL9QFTLO IWU7092Z HAN-011111i24II6I- 54 3 56 73 M56- 264 31111a 5 -921 505In 20 20120.l0.50,21 TO -9lI2U2It..UL L2uUo T= iwEh19UNis NA0-1511fi 6 2422 - - a2 2 If 72 36 - 120 20 Id 46 - - 511 30 92 23 151 0.10. 0.2tel TO

5*TOtal VIMlISI1WS MOtImf OIISNKM m1 09 M1 III - 2.13 61 a.02 1 2.66 1,4 11 5 3412.66 1. FLMWEiS MlE3I1 K9U9UT 91012KA -MWLW9IFSTWATHIZCFL*10tCWISTI FtM W-MM11 24 40 34 24 12 244 4 97 114 144 9 49 503 100 230 I 11214 72 IN0 219 402 220 720 0.5 0.! 0.51 TO -411209O NA6wDT212W131TSMI IIS IVUNM-5NT 52 24 24 - -40 5 I36 n7 -- to 42 1 i9 - - M 35212 332M3 ot0.50. 0.21 TO -2M9FLOW2TIO12UWWAVOT IA"110IU U 20 75 71 25 25 220 5.2 IOt 30 3012 527IV 114 III 449 404 174 10 lo4w 704 4M 215 1.40 0.1 0.1 0.51 Is -ASWWW WPUWT 961-11 72n 6 24 24 196 3 In1219109 72721"S 155259229540100742 111 445 III 742 0.104.51 0.51 TO 5*-otl PUEUi USW 96140V11 TACf1 ION Km 36 06S 7M02M2402.474 3M 5.3 913 409 369 1.142 Wit6 2,472 441 31,202 total ShEA 1,~~~~~~~~~~~~~~~~~~~~~~~~~t411-2.3241.2457 45 24 5.4 1,9 2.51 s1.196 54 369 4.37i 9114-2.0918 970'6,071

21. Ministry of Transport

-590093 i UNlll2U-UJIEM C23100-fUobi N41-lA 22 40 12 - 4 4 49 243 49 - 40 54 M1 62 - 4 121 222 65 404 Oil 0.3 fill TO TOtalKr 4924 M 9-- 0 540M 62--IS W25M 61 04 72241 1.62~~~~~~~~~~~~~~~~~~~~~~~~~~~~t4Ida4 1.24 412 M4 64t1 1.6d1 1,0191.LIM14VA3M 7.274i 1.11A3,140 li03t hVi7

Sources: RUI andsission Utimotes. TINIAL ZAIWMAf- lUMT ClOAK I - ltflJCT Ooiaa-OOlasaCra1u birtd - Cbait Table

(ISIS~~~~~~~~~~~~lOOOiftA3 ~~ NI am ma ?armagoc

Smu.ts km-a Call, - ouslslfrie Calsaewn, tIl lb. - -- IEWICa.0.U4.I Cal. a. kmus uf athi no. tildu t4 low'i 1m w0 Si Cast aM amU an? aM am1 MuA lo" 09t" am au am0 Totl for. LaIi,lass lam l'wa in ra. fatwe. bt

I. lWfAOl ciNf A. 9UA% arMs

1. IEINMTIWENO ILlIOfI aVWa

.lfNluLaIS41 OFWil nw K ii I M 3 00 114 114 At 447 it 951 2,79 i.tg ta1il 2,107 13,111 1.119 1.000 1.9?. 5,M0 2.2. tentl 0.040 9.01 3,047 l,Mn 0.1 10.31 0.11 UX - 9o~g Ap g IflffS a 04 ill 3o6 lii t Its113 a SU1 1 A263 .36 7.744 asia, 7.39 ait still 3.010 3.215 1.70 10.21 3. 1.1115131,514 10,310on Oi1.21 0.13 CO -4MeaOfUMTEiS W MaNES A 00 IIn SU ass am1a.oi a5 an1 mu Ii ,p 73 a.50 iii sa1 an U 113 2,O4 714 aa3 34 2.01 Il 0.35 0.01 to *WITh.i tilDaIROF lIlIE la iJ5 o.s a,,: - a.2 uo.a tie so 691 - ,1'3 aTS 34 IV - i114 13 is 32 a.1611Sal 0.31 0.13 to kb-Mat4Jflbiflf fl IaaTOaIN 1;.2 4.429 T.41 I.0 3,42 20134 2473 NiC142i.i 9.,1 ,M mm32m n.sMaHOW 0.9 X-.m 2. 41973113 KWSiLIT4TaUMi

- OFnVI TV101n.i 29 70 I25 125162 411 it. on71.217 2.011 2.03 2,0ll 4.122 47 a1,09 2.313 2.170 2IMP 1121 3.046 I'M0 laW I'm 0 0.35 4.07 00 .l roif R NMat, II4 a ll aN l of9 s0 as1 1a1m 1.1ri il1o s.316 li.e 1Ys71i 1,213 3.61o eon7 4.1991.77 2ma1 1ow one404ME 3212.110 0.00 9.A 0.11 II 409016 OFrulIwSO to 1.614hl3.09 0. 430.0 3.014 019131 0.9 1.124 3.010 1.'M 1.30 7,44 17.5111asia s.ca g.M tatil 7.12 32.72 13.7w 3.04 7.074122 4.00 4.J 0.1 0 AAIIUWOF0ALLAT IN.0 730 71 1*7 a2? 03 421 to 290 700 0740 I.7M 539 0.0 29 004 1.71 11.319 mat 1.012 1.3 2103.29A sat oe 5 earn to -WtSh FLW VIJI to.0I 20 74 as5 azi 42 tal 0.7 IV7 309 39190 M9 I'MU iso sn so M Jn 2.133i2w ml16 I'M ge 5 oa% to .nRAMfI U 111IJ U 04 Ito tIn in9 II 00 0.7 000 MU43 I.2 2.734 M 1.706 400 1.111 2.141 2.1 a.wd o.w4 MISu 3s.c 1i.e £o I 0.33 0.01 to -*t 7M OrfMc Um 44Is1311n19391I 2.1 IX IAl 013N63 M*2 " 100iIN011009121633.39 1111132aM1 0 0.33 0.03 to -atfifU WlmsC 0 - &Z£ . . . 2 It., -. 050PA - - I'm1 -1.13 - - - a,am in 79 a.t30 001.7510.47 u -CONI7..11O.i nITDAINif 511913 U 0.3 . 5 301.7 9.7 4.7 41.7 11.7 054 450 2.249 047 314 4,117 639 60 2.018 IlI 024 OM1 10.7 23.15 719 4.291 0 0,35 0.0 5X lb-fatal asUUTEEII ~ft2illS em a.co 19.010.2120170.34 7.052 1.7000,097 0.120 4.33412.030113.11,312339 22.93 14404 74.3

-PAMEtIflhtTL.iF KM1311W3 9 72 12 II - 0 .1 lOS I9 0 - - 339 [is 7 Id3in4 3VI 51 3 li 00.71a 9.0 a - FA11iF TIC 32101 3 90 19 09 ?9 - 10.7 2,39 3.00 2,109 1O 2 91 2.01361.019 3.290 l.3M KimO 7.96 low9 H 14`111 0 0,7 10.00 U

10-TotalIIC KS?S 1997Sf 2~~~~~~~~~~~~~~~~~.7 293 10 - 0.909 3.003S~~.9431.31 36.030 3.292 -11 0.0 1 .2301~414OI 10 1 072410,06 1*-titl lWM9i ml kIm112.9 9002.0M alsI12 MISS90 ,112.212.5 2034 00 02 1.0 1a I. 0900113M- lliChflaMR

-q orp" 473 (0010 nuasus SIAfI I3 01 2a 3 07 104-I 1.191 2.7M 3.144 10 7,92 N13,4 0,11 i M LOOP1.S4.7 0.329 Islas liO 10.409 1. 0.00. 01 U *INSALL,W.TT9MfCCUO 9tPVM Sf021l0 I II 21 1 47 31.0 - M 430 hO Ili l.i22n 321 M4 MU1 17s 3,400 142 1.04 ml3 3.67 0.1 0.3 0.11 U -finS OVIES. (SaIUw a3 - 134 lB Ii SU4 34.7 - - 0.0 6.27 III 11l471 - 1,9 0.0 Up 12.472 32,7 blOt I.W 11.07 0.0 0.4 Cl a -ImmtUioIN iffLn,m 93171 - 11IS to 17 316 1.0 - 7 3.006 92 1,47 - - 92 I'M IV? 2.43 m am an i.e A 0.24. 1 .23 a0

W-ieli lIIW 5P- lUMUteiO ItAf S - 1.03 $0.34 11.79I , 1t.. _i. - 1.72011 s 1012i.34-1.93 51.409 -2.lm 1.44 3.200 31.00 C. TONS 51001W

*CSPInIT.t OrXif TOINI U 2.1 7.9 . . . I 103.0 l 11432102 - .171 al9 12.17 - - I v2e7 00 06 lM 1.374 0.1 9.35 oil el -attiftam a mIfail v idl a 4.1 02.3 2.?1 - - 30. 120.9 743 2.013 322 - - 33 56 2.71 61 2.907 im03 t.4n 443 2.4 0. 0.3 0.1 to -( d1Ma. W . it fShiLu 31.02 0.2 1.9 3 - 431.7 la 77 00I - .723 94 III aI'M - - 1 Iail19 0.0 317 3.1s12 .1 0.3 9.11 to -111. I lumaim 1911IOA 11.M2 0. 2.1 2 - 011 Mi 2.03 a2 2.075 .131 1,220 1.009 - - 2.12 a 1.39 VI WI13 0.1 0.35 4.11 U -910650 tUTU,. U M(31901 I It St0 Nlo00 31.0 204 1.032 - - 1 2n9 1,111 I'm0 - - 2.3 a,m1 mS o 3.2910o6 0.7 0.N ai

kb-fatal filMANV018)w 161 .0 ,0 .4 .1 .0 .9 - - 1.0 .7 107 110 9. 0. IffIEJPS FACILITIES

-CaMTmXIas[aO . APO gttO. il. f3o 0 30 N 10 Is lit 6.7 004 911 1.024 i.U2a 67 001 907 9% 2,970 1.003 44 ,2334 7.101 3.117 93 6.94 U.S 0.31 0.11 U -ff41 I liflLW CFtUNERwff 100990 i I I 2 2 I 7 ',99.0 0.00 1.011 2I'M 2.040 I'm0 7I'M 1.110 1,100 2,131 2.29 s.C" s43 04364 3I-Ml 90 94011 0.9 0.7 0.1 to -tdh. I two.Uor 35T311290FA V I I 2 2 I 7 10t 01I SOII tI2s 0 11 9It 1,213 I?? In 400 03 337 1.044 10N M 217 1l.0 0.1 0,3 0.1 Ue 1*fatal IifKmo FtRIlIit I.9,-s7 _,12.9In .119 isI s -ai., 2197 2.19 I.-In o;-I, 3.-I 1d,77 9.03 3.9 1iaa unM

-9&M4101KW- FAO-PiM 0o 10 329 210 of 779 3.1 91 .101 249 S Ill 1.109 lita zi o Sn Its l.m m ns a a= 0. 0.3 0.i1 la -C00011309313l90iXF CU511 060-00 30 16 K 30 30 131 3 N It 41 03 N 101 a It 74 a. man el03 194oNd4,0 .23 0.11 ri

kb-fatal KVSUvlrAP mitmi. af 219 -420 46 13 1.422 as 29 lit o3 23 1.042 001 1.140 270 lam fvo4i IfATifE Snif 12.412MTIU ga.3 ens n.m112201 ,33 iu31 22.0 s0.16 311,30122,943 279.3 "Am42 vast 3d.e7ii

Mat~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~uI 22.11 2 64,10041a09 1.035 10.20 3 SitII'399? Us.50 311212.9013 179s2 9774403,114 20.04 179.2

PAg 3a0191 tOGS1 source armA and alsica *otisaatoa. VUUFA2 KAILVAT- 226V COVU10 VOICTW Parana Corridor - Cost Table

lopolli, kw4Calls t.W.l tqis2m co4goaunn 19.l "M4. - (Fel~7g. RodusI C40. Fe,. INN. $= SAl too5 3l33 337 I9TS 30tm oul out [oil 393 3its 396 two0 lop9 3gb! 3W 360 ri 39M 3 M 1 tot F.w.(g. Taal to" foul WA0 W. To 00140stin

z.Mn Call . T UT ml

*51062111111U OMt I LOI i 14 32 14 142 341 II 460 40.2 3,442 4,49 &,30 &.M4 2,90 22.34 .4 .4,W 1,gd fU.2 139 4,131 53,41* 11.30 30.391 .131 53.231 0.1.150.3 0.3 U *Nev t a N1W" an1.3 a 0 340 373 III0 U 36 3.203 still 5.32 2131 2,403 U7,3 3,26 low1 7.060 7,064 4,3Y N4.ow ,04 12,0 3.025 24A9 0.15 0.3 9.31 M -4.31 K44I3211U4111raa ls A I'M W 3 24 - 2.432 M. 044 044 243 36 6.WM *.1s "W m v z.as2 ,W' I.W 1 2.255 0.11 0.35 .0.3 U . OmW N W $11u110 a 9.7 it.? 30.4 40,4 04 713 1-364 7 0 313424 in 17 23 3.04 0.3 0.1 0.31 co $A441.3. *93913913 EIM12.34tIU01 . 9.49W33.336 32.342 4.31 40,140 ,221 I3.I 37,494 0.19*0.4 33 2.21 22.35 33.03 -.414 OM.3 2. kt391A inWI*ItAiU On

40m V 30M IN. II 4 514 174 174 17 39 32.3 492 3,279 2,14102.40 3.09 2.3U1 491 5,77 3,412 2.411 1.447 1.434 2.31 4.07 1.42*40 0.14 0 0.3 0.17 It *flink W au3 U 19, 302. in1. 17n.7 4.4 s2.5 3 99I 2.2*7 4,39 4.39 2.33 *4,217 2.454 2,90* 1.22 1.2 1.4734n 17,64 33,2 3.391 2a4 17.3 0.44 0.35 0.36 It -m *o W 33fl131t loin3.072 4.1974,197 2.291 *1,232 * 1.442 2.31 4,407 4,44 2.'M 14,191 3.309 2.02 3.444 5.171 .217223.422 DM42 2.647 2.sm *. 0.46 0.7 0.34 01f -4A?111 3.34AU TV.a2 49 IV7 2 212W *if My to 492 32.24 2.177 3.37 1.972 ?,M9 496 1,373 2,416 2.464 3.02 9.403 3.911 4.31 Is1. 1,0.11 I 0.3 6.3 U 39.0J913 W 3.391 39.U 40 144 I7a *4 7 Po9 1.3 M4 NS IN 0 402 2,93 2M 19 3.427 3.1*0 31 34220 3.30 1.71 W37 .3 6 6,35 0.35 U W3.DDt v mu2* u 19.731021372.7 171.1 1448 1232. Ila 142 IN 1479 1.471 h4o e.9 340 M9 *711 3m1 I.44 512i7 2.417 2.93 41 1.673 06.3 0.31 I 101311111?MM M2 7 372 M1 M 144 9M 2. 210 140 6994 I"4 I'M9 22 all 3.46 2.373 34 3740 I'm0 1.'M 101 1.740 0.44 0.20 0,35 U

43979.03.31 3024W 33331 a 10 22 *6 to I 14 v M9373 I22304 3.42 5In 4449, M0 .10 love0 I'm 743 11.47 3,31 2.93 *3 0$.V7 0.45 3 6.35 U I40tota2 0130339w0263330334 M 4.79* 3,1I' 7.3253731 61.70149.741 &m, *i.m ao,711nt3a 12.32221.2 27.74922.2 11.44973.33 2. Ian MM33An Nt W

6331.IWAL.UW KW3739 6 5 0 a4a *2 17 313141.104 1.079 32.9 31,1113.34 3,4*1 3,147 2.400 AN 2M 3.147 0.1 0. 67$. U -nomuA taMc utI to 135 3253 442 *1.2 1.34 2.31 2.44 13.* 60.40 1,M 2,331 2.539 3.711 7.04 5,112 3,1 30 1.V0 0 0.75 .0.3 a

3 fdToalMX1 ot mu4 13.47 24.29753.521 31W12537*1 113434531*2.4321349 41.77440,191 22.744347.140 00,243Wool9 23,79 347.540

."= vU 339319439.32365al 111734 I 39 24 2 34 2797. * 2.3- 503 7,3401 M9 *4.46 - .3 7.2239,9 *.= 33.3 14.154 2.330 2,31129 13,9 6.1 6.0 #.I a *3MI.UvIW7IC 3tS3SIUM 1141349 I It 24 2 24 4JSo4.3 ,9 ,27ti146 2 .4 46% 1,14 2 231 4.140 371 3.430 729 4440 0.3 9.3 0,21 U . OFUV 13 &I111F1K1 1231 317 v9 in 32.4 - - 3.3 4.224 M9 7W73 3.937 596 In 1734.39 6.39 3.o3 3.da ,31. 0.3 0.1 0.3 a *6763233433549130IF- 231 217 29 177 2. . - 4 4 73i ol 3.31 GU.42 924 92 2.30 514 629 246 3439 0.3 4.3 0.31 Co

0*1011-fu333012 W1Ta ~ I 30.12333,644 3,543 311431 .3464 32.43533.ow 2. 'la44 27.3 4.44 4.329 3.441

.(13330496v U 3vim 4 . . . 6 133,9 379 744 . .- 1,11* 434 4 M - - I.1M 02 604 362.94It 0.10.31 4.35 U .N2UitOt3U (93134 U 1TA9 K 2.3 3.3 . . 5,4 In,9 114 W37 . Ism9 M3 a9 Ism.324 4 4521 I6N 3.2M 0.3 0.5 3 0.3 -mm3. I 1. vUV304733 11.E1 6.4 2.0 4 - I la1 M0 94 400 * ,539 74 102 so - I .01 W4 4IR 202 3,010 6.2 0.31 0.5 Uo 41016.I4 19134M MMO MW 33T3V.U 02 0.1 2, 2.7 13. 7.3 W.) IN4 1,q ,44?11 403 is21m234 3t,53 3.31 644 - .43 3.331 1.716 $11 3.431 04. 0.3 4.3 Ul A~*300LL,,I U 13 IP 6 30 t3o t6y * . 33 30.4 273 low7 1,3o 2MI' 311 3,307 3,391 * 3234 2.33 29 21 1.314 4.44 0.7 0.01 U

5ht,t* yen0 N s m 1.447 4.11 2.412 43 - 9.03 3.7 4,93 3.510m_04 -0.643 -4.99 -4432 2,302 10.

OF333" Mm.31023t1 tO. 33 M a 6 20 i4 330 0.3 M9 M2 1.02 In 463 4.41# 693 9W 2.06 3.344 Pi0 ,. 3.913 2.794 in0 ,3111 0.3 .-35 0.5 co . 4 3443 11111 WINTER 13 V 1 3 2 3 I I 699, .490 3.460 2.46 I'3.3 3. 60 014 3.3 2,234 2.33 13.53 3.3 7.734 1.31 Ism8 77 Yong3 .3 4., 0.3 Uo -aim9. I(939, a am tol Y i I I 3 I 226.3 20 23 440 220 IE -3.53 2id 036 10 IU Wi 1.o9 34 04 31.14960.3 0.35 0.35 Ul

v gm24U. NA-MM3 403303I2P 4 I .310 3.5 933So1421So 1123,740 343 411 II7 1774 M7 3.3. 5 1493,204 b42.770.3.214.1L T& -(11Ut1011111N 3 2ElmUm =t 11114"3 a 3 3 is 3 In 2 40 I3t 3 3 40 32 a3 41 74 W9 v 32 M 21, 22 53290.4401.3 0.3 101

O4h,1141W31335111 W 324t 135 420 W2 422 232-4'9 135 02 M9 154 5392.321 433N 7 3741N2400 foul3239 lm1396111 3.7 53.92 23I13 a3n 30.933w07,3 34.60' 1932 04.04 .41.0 27.311213.311 349.317ml"9 39.113123.112

An2,I11111 latfo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- g fb - n.u*lDmaa h kotaci UIFIA eel mission estimates. -54- Table 3.6 BRAZIL

FEDEthL RAILWAY- EXPORT CORRIDOR- PROJECT

Project Finaucj.ng Plan Suary 11 (USS 'M000 a. By Suary Accounts

FER 1OULDDME IgmES EFSA 0IEl 0 1uwNI Total

Amont AmIount Z Amount Z AmtA I Aumnt Z bAurit Z - - - - m~ ~~- - _._ m ma. -_ _

Ie.iNESXT COSTS

A. CIVL 111KB 52i052 23 3995 21 7noss 38 - - 24,706 13 137,011 47 B. Il1iWLS 57v52159 14,102 15 25483 26 - - 0 0 97,00 24 C. EWINIElT 74,M16671 - - 47M 5 7,610 7 17,431 17 103,m 24 B. SFTE 970 10 - - 242 20 - - 0 0 1,212 0 E. TECHlALASBITICME 4,549 50 - - 4,347 49 - - 202 2 9,OU 2 F. TAIDAI fFPERSI 704 50 - - 704 S0 - - 0 0 19409 0

Totl JIESTNT COM 169,93 47 54,097 14 106i,50 27 7,10 2 42,341 11 400,514 100

Total Disbursmnt 139963 47 54097 14 106,90327 7,610 2 42,341 11 4009514100 - - -= - --_ - - -u

Ibv 2, IM5 10:56

b. By Project Component

F0EML vmu DM 1mE5 WmA OTDS UIEN Toul

Aount Z Aount Z haut Z Amoun Z ASmont Z Aurnt Z

A. AILVATPOLICT I INSTITUTI l IELWIENT 49002 55 - - 3,073 42 - - 202 3 -7,27 2 B. m iNA-m CAIS cRiR - -- 7760A 21,913f2 56,1it531 1676 1 10,i75-6 92 -45 C. PMM llI 97,185 45 32s194 15 47,315 22 5,934 3 319363 15 213M9M253

TOal Diwummt 189,96347 54,09714 106,50327 79610 2 429341It 400,514100

1/ Based on targeted four-and-a-balf year implementation schedule.

Source: RFFS&and mission estimates.

May 1985 BRAZIL

nDK3AL RAILWAT- Z ,IT COIMM - IROJE!

Polilg amd Inatitutlalai Developofit Cononent - Vinancin Table

VWibmWh Fs1rtie.I

IM 11% 1 II . IM 1 I IKNT

n19W 593 £979313 TSI am it 5931933 293Tel. SW1933597594319 Total Im 3ns:s G= s2s2sn sans a s 2s mm mmsm238us 3 Sm St= 1. RFISA

A. COST-161103"1331W

-SNW ATIN WTNWT ICIIUMOM 17 36 19 - 72 17 36 19 - 72- -IWWINIATINW LIMELO NOW3333993333 - -93L311015313133 9 _037 33 23 - n 37 - - - - 3- - - - -

WWIT-WISM11 ts4 3 72 29 US 34 7 29 i n ...... of U3T-mwI1I3 Tim! U (USZIMAuto3

-wu"Im U ITgALInu a n7 - - to a1 72 - U - - - * el SdeU5m 3 72 - - - 10 3 72 - - 3- -:18ITE .OFM ta a - - - In to a - - I -KIIN I WIEIATIUW0?fhU 34 n7 - - -.1 34 n - - - 14 0 . . . .

b-NTsl-RV*" Ih IWL1 UI. TUiUA.VTI mm.NM n u2NA KM IU .1 24 6.- - - 463 I4a 2 R-4 . . - -.K - . .I- .- - - e. UWIIW-KW Iu^UTIN M111K V331n Wt 39 1 34n 1 - - 1" 45 U n- - - 24 * I

41.3 5K1.UWIMIIUW T R22 115 U2 37 - 3 IU2 15.5U2 U7 - 43 -- --

-intoIlMtmuAlnUIumS oilU to 43 2 - 5I 4323n - - 71 -

l.h-TotalP1311W A mam alto 374 7 411 779 3--1 n7 3-59 79 - 3 . * - - . . I ftMIU IiI IChLW5fI U3 a 3 U mU 4 11 " 36-

<11U111113W11U31113112"l a 46 * 55 3n 4a 44 - - Its - - I -135 ATINOF OKKKTIL1MFIIU 57 2 4n 37 914 256 m2 noV 4 74 - - - - S 4MKWIIIT"MIt I 129 7 35954 VI £3 12NUS9 4 VI -

Wyou% K3 INSiNfLS into Km I" 32 415 234U XE 3.1 I SU 01 M4 IN - - I -I - N6 ItIN915534tIN3s1W731 W16 673U24 IN3.073 0 55 I5 Total RFFSA 3a.mee eea.. e.emeanse m * .... e.. m.

II. MLnistryof rransport

WU11 1I 43mu2-3111 1 C 3ItF3 27 144 3 - - - - - 44 -

Totl M 144 31 2 u2- - --2 - 144 -2 1.Hsrdii r ot rrW3po2t Toa 31" 1.399 TO 34 SE 4.32 7331154 e 34 IN 303 2 144 3115 M I Tot31RFFSA ,,,, ,1,_,,,,2_ ,2._mm_arn _5 _,* ...... _33333, _,, *,,3 e...... me .335 s . BRAZIL

FEDERALRAIuuyT - xDoiLTCORRIDoR - PRoJEcr

Goias-Mimas Centsn Corridor - inauiueig Table (UJS$ '1000) Iwflatn 94runmn

i.zsw am

I. IiinTfT n.3l4130m

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11oa39. lie na:a URAZIL

FDERAL RAINAT - BXPIORTCORRIDR - FERWICI

Parana Corridor - Financing Table (Us$ '000)

1.towsmem ~~~~~~~~ILI- m - m -votLalleacmI Doan i 9Wt 539 3.m 521 el 1W . 1W. 3 . W. 51. i . W 53,1 5W4 50691total 3 4980It MW11W11 311 21111tE 11,11 -LgoF 911- 1-m246 - -J - - 41,1 -- - - -m -i 21 -. ------bnatlw .J1 11 -.. 4M.1IIa1351 9M v -3M

i. 111111MNINmsilam

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Si.f.Oai~~~5MflS5N1WW1W - sum a3m lii 0.5 3.3 3.3Iwo1.3 & £4 3904300I", M 3W OW .3 Mmm -aaw 9mm x 13 412 0 1. p9 s.u IMl .am0 .g 0 2319 U a9 39 m 39 s..

SWUISSI JI in4 111 hiM Wi.W 9 sa. m . E M I 3. W Wmu 1Il 3146 em1 a,31 3.12.1 m .U I Insat.1"I39. I"

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a4lob.uaWMiIN aI5IUN 19, W2.41s I 1.1125.1.9...?.36443393 . M331.M US 900.1.0 -0 hutto-a ss aMa1sau .u 4 242t-S -3 - ,0 -M -n3-1 ,U1.13UW1-GiMVSS 41bAJ M 10 WX176SA - -1 foul wmu M,is a43 M- w .,1.3.13 .-. m- .w7-7-xoS au'M-327 am n i-O c- .. ;7 a - 02mv-,, I . .

mtmaasiuzuwmeinmt40 ES 90.31 31 31 i? 34 14 6 39 90.. . 9~~~~~~~~~~~~~~s - 58 - TABLE3.10

SAZIL

Fan=" Sammy - _MOI cCEoR - PROJEC

Xstimated Sebmimla of Disbhrsints (08$ m112lon)

IBRD Estimated Estlmated Bstirnted Fiscal Year Semester Cumulative Cuoulative end Semester Disbursements Amouv.ts as Z of Total 1986

December 31, 1985 18.0 9 18.0 9 June 30, 1986 7.0 25.0 12

1987

December 31, 1986 10.0 35.0 17 June 30, 1987 15.0 50.0 25 1988

December 31, 1987 25.0 75.0 37 June 30, 1988 25.0 100.0 50 1989

December 31, 1988 30.0 130.0 65 June 30, 1989 30.0 160.0 80

1990

December 31, 1989 20.0 180.0 90 June 30, 1990 10.0 190.0 95

1991

Deceuber 31, 1990 5.0 195.0 97 June 30, 1991 3.0 198.0 99

1992

December 31, 1991 2.0 200.0 100

Assumptions

Loan Effectiveness: September1985 Loan Closing Date: December 31, 1991

I/ Includng initial deposit of US$15 ailli-. into the Special Account.

Source: Mission estimates

March 1985 I 1 A 2 I L

VIS DS R AL t AI LV1 - AI *P 0 9 T Co a kIa DO it - F a O * A CT

I F r s A '/-I n e o n e S t a WIIL&4!J- oncomeh115 Statment 1CrS btillie - he IS8Sd395 alues)

1919 1980 1989 1982 1983 1384 2, I985 1936 3987 M98 1969

A C T U A L Pr.liainy * 0 A t C A S T A D leveflues

Freight 1,953.5 2,175.1 2,066.8 2,167.7 1,987.5 2,216.9 2,557.8 2,859.6 3,059.9 3,265.8 3,463.6 Passenger 81.3 66.8 61.6 71.1 54,5 41.8 39.3 37.3 35.7 33.8 32.4 Other 56.5 64.3 96.4 12864 96.9 78.2 106.3 106.9 107.3 107.9 108.3 Sub-total 2,091.- 2,306.2 2,224.9 1;TM713 T:9 i2,3z !70.4 3,003.6 3,202.9 3,0I7.4 3,624.5 Nerualteation Paymnts 97.5 1 237.6 616.6 680.S 541.2 403.6 S36.5 514.8 501.3 491.0 482.0 Total Oserating tevenues r, nwa!10.T -). .T Y1 T 21741.5 1;7,2T4.9 T3 W.JS T 1.6T 3,6898.5 4,106.5 Kapenoee

Salartes and Vages 2,248.8 2,044.2 2,082.2 2,113.3 1,561.8 1,3798. 1,U42.6 1,437.9 1,465.2 1,523.6 1,587.6 ruel 375.6 446.4 450.7 442.5 404.8 506.85 551.3 75.4 611 . 646.1 682.3 Materials,Spare. 396.9 423.1 363.5 319.2 247.8 311.1 368.6 380.3 393.8 406.3 419.0 Contract Vork 146.8 254.9 147.2 168.0 34i.S 173.9 196.8 213.8 221.6 235.7 230.0 Other 133.3 217.7 132.9 157.3 129.6 150.1 169.3 177.8 186.5 196.0 205.6 Total WorkbnsiEssenees 3,310 1IIE2 T76.53,1 T3,20. i2.TF T.NTM tii22,2. : 2i75 T1r17 IM 3'T2I IT, Depreciation 482.7 415.7 400.5 476.1 530.6 650.6 875.4 1 129.8 1 189.1 1 246.5 1 279.6 Total OperatingExpenses TYI1 3,70TO T TJ6 3,01.3I 3,S77,0 TNvU 1Y.M1i 13,64.0T' 1hE

Worktig IcaeA/(tegs) (1,116.4) 1357.5 (335.0) (172.6) 194.6 218.1 511.3 733.5 825.6 685.9 961.6 Operating Inceelc(Loes) (1,599.1) (258.2) (735.5) (648.7) (336.0) (432.5) (364.1) (396.3) (363.5) (360.6) (318.0) Not Mon-OperativeIncome 47.1 74.3 75.2 53.4 39.1 27.2 20.5 19.2 20.9 21.1 21.3 a Fi7nneial "eee 896.7 1,504.9 1,796.6 7717.8 1,244.4 1,592.3 4.5 22.1 45.1 76.0 307.5 w AMIUAL LOSS 2,448.7 1,"6.8 2,456.9 1,375.1 1,S41.3 1,997.6 348.1 399.2 367.7 415.5 404.2 - -e - s - - n - - - Vorkini Itole - vith noraleastion 3.53 .96 1.12 1.06 .93 .92 .84 .79 .76 .77 .77 - without nornalitetion 1.56 1.47 1.43 1,36 1.16 1.08 1.01 .93 .90 .U8 .87

Operating latte - With noruailluatin 1.73 1.07 1.26 1.21 1313 1.16 1.11 1311 1.10 1.09 1.08 - vithout normaliution 1.81 1.65 1,61 1.56 1.41 1.36 1.33 1.30 1.27 1.25 1.22

1 Ixeludtrg come ter earvice. ! Pr-audit, preliminaryfigures.

SOuces 3FFSA and ulsilom estimtes may 3965 - 60 - TABLE 4.2

BRAZIL

FEDERAL RAILWAY - IPORT CORRIDR - PROJECT

RJrFSA' Average Worklng Costs per Trafflc UmIts, 1979-1989 (Iarch 1985 Cr$ per ton-km)

Contract Work & Salaries Fuel Materials Miscellaneous Total & Wages Expenses

Actual

1979 81.21 13.56 14.33 10.26 119.36 1983 52.77 13.68 8.38 9.15 83.98 1984 40.61 14.99 9.60 9.54 74.74

Projected

1985 40.09 15.32 10.24 10.18 75.83 1986 37.72 15.09 9.97 10.26 73.04 1987 36.25 15.13 9.75 10.07 71.20 1988 35.00 15.05 9.48 10.03 69.56 1989 33.79 14.99 9.19 10.01 67.98

Source: RFFSA and mission estimates.

May 1985 - 61 - TABLE 4.3 BRAZIL

FEDERALRAIWAY - EXPORT CORRIDO - PROJECT

RFFSA I/ - Prolected Fund Flow Statements tCrS hillion - March 1985 valtiei)

1985 1986 1987 1988 1989 SOURCES

Net Operattng Revenue (Loss) (364.1) (39b.3) (363.5) (36o.6) (318.0) Depreciation 875.4 1,129.8 1,189.1 1,246.5 1.279.5 Net Non-Operating Incnme 20.5 19.2 20.9 21.1 21.1 Adj. for Outstanding Normalization (268.3) (257.4) 175.3 175.3 175.1

Total Internal Cash Generation 263.5 495.3 1,021.8 1,082.3 1,158.0

Loans - IRD 59.6 123.3 205.4 197.6 67.6 - BNDES 135.4 181.2 194.7 145.0 40.4 - Other 45.1 58.2 64.1 52.8 29.3

Government's Capital Contribution - Payment of pre-1985 debts 2.568.7 2,555.8 2,541.4 2,017.4 1,544.2 - Other 37.1 5h.7 E2.5 79.5 29.7

Sale of Assets 26.2 99.5 81.1 55.1 Decrease/(Increase)in Cash 3,478.9 47.5 (449.1) (582.5) (702.0)

TOTAL SOURCES 6,614.5 3,617.5 3,741.0 3,047.2 2,217.7

APPLICATION

Investment

- Project 135.4 292.4 449.7 411.6 155.4 - Other 561.3 670.8 078.0 499.4 343.4 Interest

- IBRD Loan 4.5 3.7 2.0 7.2 2f1.7 - UNDESLoan 0.0 13.5 31.7 50.4 62.7 - Other Loans 0.0 4.9 11.3 18.4 24.2

Loan Redemption

- 18RD 2.5 7.h - BNDES 8.h 2U.7 35.0 - Otler 3.5

Pre-1985 Debt Payments 2,568.7 2,555.8 2,*540.4 2,017.4 1,544.2

Change in Working Capital (excl. cash) 3,344.h 76.4 19.3 19.6 20.8 TOTAL APPLICATION 6,614.5 3,617.5 1,741.0 3,047.2 2,217.7

1/ Excluding commuter service.

Source: RFFSA and mission estimates.

May 1985 MDU &L RUIA? - PORTCOIRDOB - I)URC

NOM 1ameal- bet, 1979-1983 GorrmatTalmos (Cr billion) ad Z Diutrlbation

1979 1980 1981 1982 198? CrS 2 CrS 2 CrS 2 CrS S Cr$ ASSETS

Cash 832 1,011 1,831 4,813 9,390 Receivables - Government 167 117 189 142 564 - Others 4,100 IR,703 37,170 68,270 141,438 Inventories 7,110 13,284 20,441 28,964 56,123 Other Current Assets 452 3,555 324 934 2 841 Total Current Assets 12,661 3 36,670 5 59,955 5 103,123 t 210,356 -1

Fixed Acssts (Incl. works in progress) 415,282 96 571,795 95 1,133,523 97 2,341,915 98 6,077,366 99 Less Depreciation -8,371 1 33,323 3 105,246 4 381,889 6

Net Fixed Asset. 415,282 96 563,424 94 1,100,200 94 2,236,669 94 5,695,477 93 Investmentsand other assets 2 1,881 1 4,307 1 10,589 1 44,539 2 206,468 4

TOTAL ASSETS 429,824 100 604,401 100 1,170,744 100 2,384,331 100 6,112,301 100 - t - - - m -_- - LIABILITIESAND CAPITAL

Current Liabilities 9,235 2 37,091 7 59,066 5 147,553 6 593,471 10 Long-term Debts . 93,315 22 165,286 27 417,901 36 836,070 35 2,767,831 45 Provision for Indemnities 319 - 504 - 996 - 3,109 - 15,003 - Equity 3/ 326,955 76 401,520 66 692.781 59 1,397,599 59 2,735,996 45

TOTAL LIABILITIESAND CAPITAL 429,824 100 604,401 100 1,170,744 100 2,384,331 100 6,112,301 100 t_-t m - -______

I/ Includingcommuter services. z/ Including earmarked funds *uch as workers compensati,n. P !/ Includingreserves.

Source: RFFSA

March 19S5 BRAZIL

VKUAL AILE&Y - EXPORT COR1,o0R.POJucT-

EFISA 1/ ProJected Balance Sheet. (Cr$ billUon - March 1985 values)

1984 2/ 1985 1986 1987 1988 1989 ASSETS

Cash/(BankOverdraft) 139.9 (3,339.0) (3,386.5) (2,937.5) (2,355.0) (1,653.0) Receivables 1,169.1 315.3 352.5 377.3 402.6 429.5 Inventoriesand Other CurrentAscets 599.0 348.1 286,6 286.7 286,7 286,7 TotalCurrent Assets 1,908.0 (2,675.6) (2,747.4) (2,273.5) (1,665.7) (936-.8U) FixedAssets (lncl. works in progress) 33,488.7 45,634.5 58,626.2 59,753.9 60,664.9 61,163.9 LessDepreciation 2,166.9 3,042.3 4,172.1 5,361.2 6,607.6 7,887.3 Net FixedAssets 31,321.8 42,592.2 54,454.1 54,392.7 54,057.3 53,276.6 Investmentsand other Assets 627.8 788.4 788.4 788.4 788.4 788.4

CVRD Debt 0.0 235.7 136.2 55.1 - - OutstandingNormalization Payments 0.0 268.3 525.7 350,4 175.1 0.0 TOTALASSETS 33,857.6 41,209.0 53,157.0 53,313.1 53,355.1 53,128.2 LIABILITIESAND CAPITAL

CurrentLiabilities 4,823.9 211.3 110.7 116.2 122,0 127.9 Long-termDebts 16,347.7 14,025.6 11,832.5 9,747.7 8,102.5 6,700,0 Equity- Capital 13,197.5 15,803.3 18,415.7 21,038.7 23,135.6 24,709.5 - CumulativeLosses (13,712.1) (14,060.2) (14,459.3) (14,845.9) (15,262.4) (15,666.6) Reserves(including revaluation reserves) 13,200.6 25,229.0 37,257.4 37,257.4 37,257.4 37,257.4 TOTALLIABILITIES AND CAPITAL 33,857.6 41,209.0 53,157.0 53,313.1 53,355.1 53,128.2

Debt/EquityRatio 56/44 34/66 22/78 18/82 .15/85 13/87 p 1/ Excludingcommuter service. 2/ Pre-auditfigures.

Source: RFFSAand missionestimates. May 1985 -64- ANNEX I

BRAZIL

mEDERALRAILWAY -IOT CDRRDO - PROJECT

Bank AssistACne in the Transport Sector

A. Bmghway Projects

1. The First Highway Project (Loan 567-BR, US$26 million, October 1968) was instrumental in setting the framework for Bank involvement in Brazil's transport sector. With this loan, the Bank reached agreement with the Government on a Plan of Action which included, among other things, the reorganization of DNER, the revision of road user charges, the reduction of railway deficits and the improve- sent of port administration. The project included the construction, or paving, of sexen road sections totaling 429 km in four states. The project was successfully completed in September 1972, about a year later than expected, as a result of design changes and earthwork problems. Despite cost overruns in some sections, total project costs were lower than anticipated. The audit rates of return, ranging from 14 to 40%, were, except for one road, equal to or higher than appraisal estimates (PPA Report No. 1026 dated February 12, 1976).

2. The Second Highway Project (Loan 676-BR, US$100 million, May 1970) included the construction or paving of 2,136 km of roads, detailed engineering for 2,369 km, and feasibility studies for 3,256 km. The project provided technical assistance to strengthen the planning and supervisory capabilities of DNER. Problems were encountered during construction, and the project was not completed until August 1976, two years behind schedule. Final cost was about 6% above appraisal estimates. The project's audit rate of return was higher than appraisal estimates (36% as against 27%), mainly because of higher-than-anticipated traffic growth. This was the first major road project carried out entirely by Brazilian flrms under strict specifications and quality controls agreed with the Bank. The Brazilian construction industry and DYER gained considerable experience during the execution of the project, as was demonitrated later by the performance of the followup projects (PPA Report No. 644 dated June 21, 1977; PCR dated October 27, 1976).

3. The Third and Fourth Highway Projects (Loan 813-BR, US$89 million, April 1972 and Loan 854-BR, US$51 million, August 1972) included the construction of 1,849 km and the paving of 681 km of roads designed under the second project. Completion of both projects, initially scheduled for 1976, was at the end of 1977. Inadequate detailed engineering and price escalation forecasts led to substantial cost overruns. Audit rates of return, however, were considerably above appraisal estimates: 45% and 29% against 25Z and 161 respectively (PCR dated May 30, 1978; PPAR No. 2571 dated June 8, 1979).

4. The Fifth Highway Project (Loan 1075-BR, US$110 million, January 1975) set the basis for Bank involvement in road maintenance, rehabilitation and strengthening. The project included (a) construction and upgrading of 612 km of federal highways; (b) highway maintenance and rehabilitation programs in the States of Minas Gerais and Rio Grande do Sul and technical assistance to DNER to improve maintenance planning; (c) Phase I of a weighing station program - 65 - ANNEX1

(44 stations); and (d) detailed engineering for road construction, upgrading and rehabilitation, and feasibility studies for three new highways totaling about 900 km. The project, which was affected by cost overruns in civil works and delays in the implementation of the weighing station program and of the highway rehabilitation program in Minas Gerais and Rio Grande do Sul, was completed at the end of 1984.

5. The Sixth Highway Project (Loan 1557-BR, US$114 million, August 1978) includes (a) rehabilitation of about 2,300 km of paved federal highways and execution of detailed engineering for another 3,000 km of rehabilitationworks; (b) a highway maintenance and rehabilitation program in the State of Parana; (c) Phase II of the weighing stations program (30 weighing stations); and (d) consulting services to the Road Research Institute to carry out research in pavement overlay design, and to GEIPOT to complete research studies necessary to improve the Highway Design and Maintenance Model. Both the federal highway rehabilitation program, halted in 1980 for a year, and the Parana program were adversely affected by lack of counterpart funds up to mid-1983. With the support of the Bank's Special Action Program (SAP), implementationof the programs accelerated in 1984; both have recently been completed, about two years behind schedule. The weighing station program had to be reformulated to reduce costs; it is scheduled for completion by the end of 1985. DNER's Pavement Research Program was also hampered by restricted budgetary allocations, but a method for the design of pavement overlays has been developed and is being implemented. The project, as a whole, is expected to be completed by the end of 1985. 6. The Northwest Region Development Program, Highway Project (Loan 2062-BR, US$240 million, November 1981) consists of (a) the construction of the Campinas-Ariquemessection (about 1,084 km) of the Northwest Highway, 364-BR; (b) a program for strengthening Rondonia State Highway Department, including construction of district buildings, acquisition of equipment and technical assistance; and (c) two feeder roads programs with Brazil's National Economic Develop- ment Bank (BNDES) in the States of Rondonia and Mato Grosso, which include construction and improvement of about 1,000 km of roads. The Northwest highway construction, after initial delays due to inadequate funding, was completed, with the support of SAP, at the end of 1984, i.e., one year ahead of schedule, and at a cost well below appraisal estimate. The component for strengthening of the DER of Rondonia, however, about two years behind the original schedule, will not be completed before mid-1987. The two feeder roads programs were completed recently, about six months behind schedule.

7. The Federal Highway Sector Project (Loan 2446-BR, US$210 million, May 1984) provides assistance to DNER in the implementation of a series of programs included in its 1984-1987 Investment Plan. The components of the Plan supported by the project are: (a) highway rehabilitationprogram for the federal highway network; (b) road safety program covering improvement of high accident locations, pavement marking, highway safety canpaign and purchase of equipment for highway police; (c) training program for DNER and state highway maintenance personnel; and (d) technical assistance for a pavement management system, an equipment management system, and highway research studies. The loan became effective in November 1984; the implementation of most components is on schedule. -66- ANNEX 1

3. Peeder Roads Projects

8. The Secondary and Feeder Roads Project (Loan 1207-BR, US$55 million, March 1976) represented an innovative approach in channeling Bank support for the Improvement of secondary and access roads, which, in Brazil, is the responsibility of the states and the monicipalities. The project was conceived as a line of credit extended to Brazil's National Economic Development Bank, BNDE, to finance a portion of subloans made by BNDE to DERs or to municipal consortia to carry out secondary and feeder road programs in support of agricultural production. Subpro- jects were prepared and evaluated in accordance with agreed and well publicized criteria embodied in a manual. The loan financed 17 subprojects in 12 States, comprising 5,400 km of roads and 80 separate bridges. The project was slow in starting because beneficiaries took more time than anticipated to familiarize themselves with the procedures and to establish their working relationships with BNDE. It also had to be reformulated in 1981 as a result of previous devaluations of the Obrigacoes Reajustaveis do Tesouro Nacional in which subloans were made; the scope of some subprojects was reduced, and additional financing was provided under the second loan (para. 9). By the end of 1982, lack of funds in the States again drove the project to a near halt. With SAP support, however, it was completed in June 1984, although an amount of about US$5 million remained undisbursed and had to be canceled.

9. The Second Feeder Roads Project (Loan 1730-BR, US$110 million, June 1979) was intended to provide continuity to the program assisted by the first project. The loan is financing 14 subprojects in 13 States, comprising 3,800 km of roads and 360 separate bridges, in addition to having provided supplementary financing to some subprojects included in the first project. The project faced about the same difficulties as the first project, and is also benefiting from SAP support. Works are about 75% completed, and project completion is expected by the end of 1987, i.e., about 18 months behind schedule.

10. The Third Feeder Roads Project (Loan 2224-BR, US$154 million, December 1982) supports the continuation of the National Feeder Roads Program, administered by BNDES 1/, as well as significant policy development and institution-building efforts for BNDES. The project consists of the provision of subloans for construction, improvement or rehabilitation of a total of approximately 8,000 km of roads, for a total cost of about US$500 million, over the period 1983-mid-1989, including technical assistance for advisory services and training of staff to improve the maintenance capability of borrowers. The startup of tnle project in 1983-1984 was delayed as a result of the very restricted capacity of the States to borrow, and of the political events which affected the transition to the new Government. Four subprojects have been approved by the Bank as of the end of February 1985 and are in early implementation stages. Other subprojects are being prepared. The strengthening of BNDES' management has also been delayed by a reorganization of the department of BNDES responsible for the administration of the project.

/ In 1982, Banco Nacional de Desenvolvimento Economico (BNDE) became Banco Nacional de Desenvolvimento Economico e Social (BNDES). -67- ANNEX I

Although substantial analytical work was done to prepare for policy foruilation and action plauning for maintenance of State and municipal roads, the former Government did not complete this policy component as scheduled. C. Port Project 11. The Santos Port Project (Loan 756-BR, US$45 million, 1971) assisted the Santo. Port Authority in constructing a container terminal and some 53 km of railway lines as veil as in engineering and management studies. In addition, the loan provided for consulting services for improvement of the National Department of Ports and Waterways,which led to the creation of PORTOBRAS,and for a Port Master Plan Study. After substantial delays in implementation, involving changes in project scope and large cost overruns, the project was completed and the loan closed officially in 1980 (PPAR No. 4495 dated May 16, 1983). D. Railway Projects 12. The First Railway Project (Loan 786-BR, US$46.0 million, 1971) was to finance the railway portion of the MBR (Mineragoes Bras ileiras Reunidas) iron ore project (partly financed by Loan 787-BR) to carry 10-12 million tons of iron ore annually from the Aguas Claras mine to the Sepetiba ocean port terminal. Although traffic started as planned in July 1973, it was hindered by operational problems, such as derailments on the Central Line, whose rehabilitation (financed by RFFSA) took longer than expected. Also, delays were encountered in the bridge strengthening program and in completing new workshops. The traffic situation improved in 1974, reaching the forecast level by the end of the year. The project was also to assistthe railwayin promotingmore profit-orientedactivities and to stimulate bettermanagement. However,the projectdid not addressthe institutionalissues of RFYSA, and, in the end, the Bank's dialoguewith the Government on this subject had to take place largelyoutside the loan'scontext. The projectwas completed in December 1977, about three years behind schedule (PPAR No. 4258 dated December 30, 1982). 13. The SecondRailway Project (Loan 1074-BR,US$175.0 million, January 1975) financedthe first two years of RFFSA's1975-1979 investment plan and, in addition, included a program of technical assistance. The mAin objectiveswere to enable RFFSA to meet future demands, particularly in transporting iron ore and steel products in the Central, and agricultural products in the Southern, regions. Assistance was also provided for the rehabilitation and modernization of the suburban passenger services in Rio de Janeiroand Sao Paulo. In additionto track rehabilitation,the projectincluded purchase of signalingand telecommunications equipment and rollingstock for the suburbanservices in Rio and Sao Paulo, as well as workshop equipment. The project was completed in December 1981, about two and a half years behind schedule. In retrospect, it appears that the project, which included a large number of individual projects for a total estimated cost of about US$3.2 billion,was too large for the railwayto implement,and the time schedulewas clearlytoo optilistic. Many componentshad to be reformulated and/orpostponed. For institutionaldevelopment, the measuresand actions which were essentially internal to RFFSA were successful. Regarding broader questions of policies and relationships with the Federal Government, the difficulties iavolved were underestimated, and the appraisal objectives were mostly not achieved (PCR issued on June 22, 1983). -68 - ANNEX1

14. The Third Railway ProJect (Loan 1171-BR, US$75.0 million, October 1975) financed the first two years of PEPASA's 1975-1979 investment plan. The objectives of the loan were to: (a) rehabilitateand, as necessary, expand the system; (b) improve the operational and financial performance of FEPASA; (c) improve suburban passenger servlces in the Sao Paulo area; and (d) strengthen urban transport coordination in the Sao Paulo area. During implementation, it soon became evident that the program was too large for FEPASA, which, in any case, lacked the necessary funds. In mid-1977, the Bank and FEPASA agreed to redefine the project. However, the redefinition was complicated by the fact that the lorAn funds were thinly spread over a large number of items for which the bidding process was already advanced; redefinition was completed only in early 1980. The implementation of the redefined project progressed satisfactorily until its completion in October 1983 (PCR issued on June 29, 1984).

March 1985 -69- ANNEX2

DBRZIL

FEDERALR&IMA - PORTCOUD - PROJECT

1PFSM's Freight Traffic Forecasts

1. RFFSA's freight traffic forecasts have been based upon extensive market surveys and specific commodity studies, carried out by RFFSAwith assistance from GEIPOT and individual experts. The present annex summarizes the conclusions of these studiesand the relatedforecasts for MFFSA'smajor commoditieswhich, together,represent about 90% of its total traffic.

A. Petroleum Products

2. Brazil'smaJor oil refinerycenters are locatedin the vicinityof Curitiba,in the Parana corridor;Enbiricu, near Belo Horizonte, in the Goias-MinasGerais corridor; and in Sao Paulo. The refineriesare suppliedwith Brazilianand importedoil through pipelines. Petroleum derivatives are shipped to primarydistribution centers generally served by rail. The country'sannual consumptionof petroleumproducts increased at an average rate of 4% during the second half of the 1970s and declined by 4.8% in 1980-1983. Substitutionof alcoholfor gasolineand the economicrecession have been major factors;diesel oil consumptioncontinued to increasein the 1970sand then stabilizedduring the recession. RFFSA'straffic of petroleumproducts, however, has been increasing rapidly,at averageannual rates of 7.3% and 12.8% in tons and ton-kmrespectively during 1975-1984. RFFSA has been transportingincreasing volumes, on much longer hauls, to the developing regions in the interiorof the country. With the expected economic recovery and furtherdevelopment in the interior, total demand for petroleumproducts is expected to grow at an average rate of 3Z p.a. during the second half of the 1980s,and RFFSA's trafficto increase at a slightly higher rate, 3.9% p.a. in tons and 4.5% p.a. in ton-km.

3. In the Parana corridor, the demand for petroleum products is expected to increaseat an average4.0% per annum in 1983-1990 and 2.0% thereafter; RFFSA's trafficin the corridorsystem would increase slightly more rapidly (4.8% and 2.3% respectivelyin ton-km) as a result of the increasing proportion of longer hauls. In the Goias-MinasGerais corridor,the demandis expected to increase at a similar rate of 4% p.a., but RFFSA's traffic would increase at the higher rate of 5.2% p.a. until 1990 since Goias and Brasiliawould be increasingly supplied from the Embiricu refiaery instead of the one in Sao Paulo.

B. Alcohol

4. Alcohol, which is mainly used as automotive fuel either alone or mixed with gasoline, is produced mainly in the State of Sao Paulo and in North Parana from sugar cane. It is transportedto the refineriesand to the petroleumproduct distributioncenters for mixingwith gasoline. The productionof alcoholhas increaseddrastically in the last five years at annual rates over 35% and reached 3 about eight millioni in 1983. RFFSA started to participate in this transport in 1980; in 1984, its traffic of alcohol had already reached one million tons. This traffic is iaportant in the two corridors of Parana and Goias-Minas Gerais. Alcohol produced in North Parana is shipped to Curitiba and furthersouth to Porto -70- ANNEX 2

Alegre; RFFSA also supplies Belo Horizonte, Brasilia and Goiania with alcohol produced in the State of Sao Paulo. RFFSA has plans to increase its participation in both traffics, which is currently on the order of 50%, in order to better utilize its trains of petroleum products on their return hauls. Its traffic of alcohol is expected to increase at annual rates of 15% and 10% respectively in the Parana and Goias-Minas Gerais corridors during the second half of the 1980s, and at 4% and 3Z p.a. thereafter.

C. COal

5. Coal, which is mined in the States of Santa Catarina dud Rio Grande do Sul, is supplied, in particular, to cement plants located in Parana, Sao Paulo, and Minas Gerais. Coal is transported to Parana and Sao Paulo partly by rail and partly by coastal shipping; it is shipped to Minas Gerais through the ports of Rio de Janeiro and Vitoria and then by rail. The demand for coal by the cement industry is expected to increase rapidly as a result of the ongoing conversion from fuel oil to coal in a number of plants; it is estimated that it would increase by over 15% in Parana and Sao Paulo, and by about 2.3% in Minas Gerais during 1984-1990. RFFSA's traffic in the Parana corridor (and in the Tronco Sul corridor), which is currently increasing rapidly since RFFSA is taking an increasing share of the demand over coastal shipping, is expected to increase at annual rates of 15% up to 1990 and 2.3% thereafter. Its traffic in the Goias- Minas Gerais corridor is expected to increase at a rate of 6.3Z p.a. up to 1990 and 3.4Z p.a. thereafter. RFFSA's total traffic of coal is expected to increase at an average 7.5Z p.a. during 1984-1990.

D. IX,n Ore

6. Iron ore is mined essentially in the southern part of Minas Gerais. It is shipped in very large volumes for export through the ports of Vitoria (through EFVM) and Sepetiba (through RFFSA's Central Line) and to the steel plants located in the States of Minas Gerais, Rio de Janeiro, Sao Paulo and, uore recently at Tubarao, close to Vitoria. Minerapoes Brasileiras Reunidas (MBR) is RFFSA's principal shipper of iron ore for export (it Is responsible for over 90Z of RFFSA's traffic). Iron ore exports through RFFSA's Central Line increased constantly during the 1970s; by 1980, they exceeded 14 million tons and nine billion ton-km. During the economic recession of 1980-1983, the international market weakened, and traffic dropped to about nine million tons in 1983. By early 1984, however, exports started to recover rapidly; RFFSA's traffic totaled 12.4 million tons in 1984, and, by the end of the year, RFFSA could not, because of lack of wagons, meet MBR's transport demand, which had reached the level of 15.0 million tons p.a. Also, NBR had firm contracts for supplying over 16.5 million tons by 1987. The retained forecast of an average growth of 4.2Z p.a. during 1984-1990 (leading to the level of 15 million tons by 1989) is therefore reasonably conservative. On the basis of the local industry's production plans, RFFSA's traffic of iron ore supplied domestically should increase by an average rate of 3.5Z p.a. during the second half of the decade. - 71 - ANNEX 2

7. In the Goias-14als CveraiS corridorg significant volunes of iron ore are transported to supply t&e fterl plants aroutid Belo Horlonte and the pig iron mills located around Sert LtagB and further north. These latter supplies, which the represent more than 2.1 *t1J&1oPu foOa of iron ore, are *tt essentially by trucking industry. The relL.tively short haul lengths (between 100 and 200 km) and the lack of appropriate Ctt4joals in the Sete Lagoas area have, until now, restrained RFFSA from a%Y tg0ifLcant participation in that transport. Road traffic congestion in art Qg,*nd ReLO Horizoflte, however, makes trucking more and more costly. RFFSA and ON re c1rrently assessing the feasibility of such transport; no substantt*1 ti1crease of RFVSA's iron ore traffic in the corridor was considered in the foree*stat, readiae concluSion of the study. E. Limestone

8. Limestone is Vr°d%ed ailaly in the area of Sete Lagoas, north of Belo Horizonte, and supplie4 i3 l4ge vo0luuaes to the steel plants. Transport Is essentially by rail. RFFSA's trI%ffic increased very rapidly in the past (at an average 14.2% p.a. in 1975-1984) t'1t the development of the steel industry. The steel- mills of Companhia Sida_t9ft de Tubarao(CST) near Vitoria, and Agouinas in Minas Gerais, currently 1md,t coapletion, will generate, from 1985 onward, substantial new demand for nr1rC oE limestone. RFFSA's traffic of lieestone, overall, is expected tQ incetpse by 6.9Z p.a. (in tons) and by 7.2X p.a. (in ton- km) during 1984-1990. II* %lqL of this additional traffic would take place in the Sete Lagoas-Costa LacerdA B,%piofl OF the Goias-Minas Gerais corridor, where RFFSA's limestone traffirC ia expected, during 1984-1990, to double to about 540 million ton-kmand,thereAftnt:, to gtow at the slower rate of 2.6X p.s.

F. Steel Products

9. RFFSA's traffi- O* steel products increased Considerably in the late 1970s ,t a rate of 25%2" Z% p. a.) as a result of increased domestic demand and exports, and improved paItitziparLon of the railway, in particular through developing intermodal transporc t,e, during the economic recession of the early 1980s, RFFSA's traffic continue 4 tv gr0' rapidly, from 5.5 million tons in 1980 to 8.0 million tons in 1984. FPd 4SAI participation in the transport of steel products now exceeds 502 in the GDla4a,%nas Gerais Corridor; it is about 352 in the Parana corridor. The growth of thzt traffic is expected to slow down gradually, with and 402 RFFSA's share of the tr*` 8 PPtt demarld stabillzing, by 1990 at around 602 respectively in the two £ortdors. Overall, RFFSA's traffic of steel products is estimated to grow at the aretaSerate of 4.8Z p.a. (in tons) and 5.4X p.a. (in ton-km) during 1984-1990' 10. Pig iron is PrOd'L1,d inL SMalL plants, essentially ln the Belo Horizonte- Sete Lagoas corridor in ^ n^ Gerais. The production has been Increasing rapidly was over the past few years, UR 1y as a result Of booming exports; production estimated at over 3.0 vd«lic tons in 1984, of which about 60% were exported, essentially through the °rt o£ Vitoria, although some exports have recently been increase its partici- routed through Rio de j8 lpett, 1FFSA has plans to gradually pation in the transport OLOf iron for export through Vitoria from the present 40% to about 502 by 199Q, Vh4 its traffic in the corridor should reach about 1.1 million tons. - 72 - ANNEX2

G. Ceneut

11. Cement is producedessentially in three major areas: Sete Lagoasand Montes Claros in Minas Gerais, the south of Sao Paulo State, and Curitibain Parana. The plants in Minas Gerais also supplyRio de Janeiroand complementthe supply to Sao Paulo; those in Parana supply the southernregion. RFFSA'spartici- pation in the transportfrom North Minas Gerais to Belo Horizonte,Rio de Janeiro and Sao Paulo is about 65% while, for cement shipped from south of Sao Paulo and Parana to the South, it is about 40%. RFFSA's share of the market has been growing gradually in the last few years, when some of the plants acquired bulk- loading terminals and purchased special wagons. Cement is now carried 70Z in bulk on the broad gauge system, but still essentially in bags on the meter-gauge network. Ongoing projects and plans made by a number of plants to establish bagging plants in the consumption centers and to transport cement in bulk and by rail are expected to facilitate RFFSA's further penetration in that market. In particular in the Goias-Minas Gerais corridor, a major producer (t.IMINAS) from Belo Horizonte, which is establishing major bulk terminals in Uberlandia and in the State of Sao Paulo to permit the operation of unit-through-trainsof bulk cement,should contribute to increasingRFFSA's traffic by 6.5% p.a. (in ton-km) in the corridorby 1990. Overall,demand for cementis estimatedto increaseat an average4% p.a. duringthe secondhalf of the decade,and RFFSA'straffic at about 6% p.a. B. Grain.and Grain Products

12. Soya is producedessentially in north and west Parana,south of Sao Paulo, in Mato Grosso do Sul, and furthersouth in the states of Santa Catarina and Rio Grandedo Sul. Recently,production has also developed rapidly in the Cerrados,a regioncovering most of Minas Gerais and south of Goias (para.13). The bulk of soya is processedinto oil and pellets (and into other proteinfood), generallyin large plantswhich are concentratedin the vicinityof Ponta Grossa and Curitiba (Parana) and in north Parana, and also around Sao Paulo; the rest is exported, essentially through the ports of Paranagua and Rio Grande, and exports from the Cerrados throughVitoria were startedin 1984. Althoughsoya flows from north and west Parana and from Mato Grosso do Sul are well concentrated in the Parana corridor, RFFSA never carried much soya in the corridor; it presently carries less than 10% of a total transport demand of over 3.0 million tons. The main reasonhas been the poor efficiencyof the railwaycompared to that of the trucking industry, as a result of both track condition and lack of appropriate silo facilities upcountry. With improved track in the corridor, and improved intermodal terminals upcountry, it was estimated that RFFSA would capture about one-third of the corresponding transport demand by 1990, estimated at 3.7 million tons.

13. A large potential for agricultural development has recently been identified, through a number of pilot programs in the cerrados of Minas Gerais and Goias. The region has relatively poor soil, but high yields are obtained after appropriatesoil correction. A numberof plans for an extensive agricultural developmentin the regionare at variouspreparation stages, in both the public and private sectors. In particular, the Companhia Vale do Rio Doce has plans to promote large sLale production of grains, essentially soya and maize, and to export very large volumes through the Goias-Minas Gerais-Vitoria corridor. The present status of preparation of these plans did not permit them to be taken into - 73 - ANNEX2 account in forecasting RFFSA's traffic. The proposed project, however, would include an assessment of these plans under the transport coordination - Southeast corridors - action plan. About 300,000 tons of soya were shipped from the Cerrados to the Sao Paulo area in 1983, and exports through the Goias-Minas Gerais-Vitoria corridor started in 1984 but were limited to 30,000 tons because of the restricted capacity of the railway. Pending the conclusion of the studies mentioned, It was estimated that, with the proposed project, RFFSA would export about 250,000 tons of soya through the corridor by 1990, and that this traffic would increase by an average 10Zp.a. thereafter. Such export levels would be consistent with the future throughput capacity of the existing grain installations at Vitoria, which are currently being expanded.

14. Soya pellets are shipped from the soya processing centers of Ponta Grossa, North Parana, and Guarapuava to the port of Paranagua for export to Europe and Asia; smaller volumes are shipped from plants located in Santa Catarina through the port of Sao Francisco do Sul. In 1983, RFFSA transported about 2.5 million tons of soya pellets in the Parana corridor (of which about 1.1 million tons from Ponta Grossa and 1.0 million tons from North Parana), which represented about 50X of the transport demand; the remaining demand was met by the trucking industry. The demand for Brazilian soya pellets in Europe and Asia is expected to remain strong over the next ten years, and the Parana industry has an installed production capacity well above the current production. The demand for transport in the corridor is expected to grow at about 5.61 p.a. (in tons) until 1990, and at about 2.9% p.a. thereafter. With the proposed project, RFFSA would be expected to at least maintain its present share of the market; its traffic expressed in ton-km would then increase by an average 7% p.a. until 1990 and by 3.5% thereafter.

15. Maize is produced in many areas of Brazil, but major transport flows are those from North and West Parana to Paranagua, for export and shipment to other regions of Brazil, to Sao Paulo and to the southern region. As for soya, large scale production has also recently started in the Cerrados, and it is developing rapidly. In general, maize is commercialized in small volumes; therefore, the railway generally cannot compete with the trucking industry. However, when the grain's market price is below the Government-established minimum price, a portion of the production is commercialized by the Comissao de Financiamento da Produgao (CFP); in that case, the origin-destination flows are consolidated by CFP, and RFFSA has a better participation in that transport. This has been the main reason for the instability of RFFSA's traffic of maize in the past. In the Parana corridor, RFFSA's traffic of maize is erpected to grow at an average 5.0Z p.a. (i.e., about in line with production) 1.ntil1990 and to remain constant thereafter. RFFSA expects to have a better participation in the transport of maize from the Cerrados since the production is consolidated in much larger farms. Overall, RFFSA's traffic of maize is expected to grow by 7.1% p.a. (ln tons) during 1984-1990.

16. Wheat is produced in the southern region, essentially in North and West Parana and in Rio Grande do Sul. The production of Parana is transported to flour mills in Ponta Grossa, Curitiba and the area of Sao Paulo. Brazil also imports wheat, in particular to supply Belo Horizonte, Brasilia and Goias through the Goias-Minas Gerais corridor. In the Parana corridor, KFFSA transported about 57% of a demand estimated at .9 million tons in 1983. Production and transport demand are expected to continue to grow at an average 5% p.a. until 1990, and at 3Z p.a. - 74 - ANNEX2 thereafter. RYFSAand the CoiSosao do Trigo Nacional (CTRIN), a subsidiary of Banco do Brasil, which is responsible for commercializing the bulk of wheat, have plans to further rationalize the transport of wheat. It was estimated that RFFSA would, by 1990, meet about 652 of the demand in the Parana corridor. In the Goias-#inas Gerais corridor, imports of wheat are expected to gradually decrease with the development of the Cerradom, and to be replaced, after 1990, by some exports. Overall, RFFSA's traffic of wheat would increase at an average 4.2% p.a. (in tons), and 4.52 p.a. in ton-kmduring 1984-1990. 17. A summary table of RPFSA's past and projected freight traffic in 1970-1990 is given as TabLe 2.1 of the report. The following table summarizes traffic projections by commodity in the two corridors of the project.

awn's Friht Trafic a the Corridor. 1983-2000 (In milllion ton-km)

Goias-Ninas Gerais Parana 1983 1990 2000 1983 1990 2000 Petroleuu Products 1,090 1,550 1,980 780 1,080 1,350 Alcohol 190 380 510 290 780 1,140 Coal 130 200 280 200 540 670 Limestone 270 540 700 - - - Steel Products 300 530 850 110 230 310 Cement 290 450 710 240 480 760 Soya Beaus 10 350 950 120 490 750 Soya Pellets - - - 1,120 1,790 2,450 Maize 70 150 400 310 440 440 Wheat 150 25 280 210 350 440 Phosphates 180 310 500 - 160 190 Other 40 75 140 200 390 450 Total 2,720 4,560 7,300 3,8 6,730 TW3S

March 1985 - 75 - AunEX 3

FLRM RAILAY - EMaN Cin3UO - IOJW Deign Poatures of tie Mm Corridkw Projects

A. Pimeneut Way Works

1. Infrastructure rehabilitation works couprlse the stabilization of cuts and embankments, and improvements of drainagei yyste, on about 653 km (SR-2) and 586 km (SR-5). The work is particularly urgent on sections MM - IBIA (130 km) and Sabara-Capitso Eduardo (75 km) in the SR-2 region, where, because of river erosion and heavy rains, the week eubankients require reainforcoemnt and protec- tion There are other sections (about 400 km) where drainage system are non- existent or require full reconstruction. For the sam reasons, the Apucarana-taua (43 km) and Uvaranas-Paranagua (199 km) sections in the Si-S region need immediate attention. The component works wil also include rehabilitation and strengthening of existing bridge structures, about 1.0 km in SR-2 and 2.4 km in SR-5; rehabli- tation of about 1.7 km of tunnels In the Parana corridor, and lnfrastructure work for the lengthening of existing, and construction of now, sidings (about 17.2 km in SR-2 and 20.4 km in SR-5) to accommodate longer freight trains and more frequent services The proposed infrastructure works amount to US$32.9 milllon for SR-2 and to US$63.3 million for SR-5, including contingencies, and represent 24Z of the total cost of the project (Tables 3.4 and 3.5 of the report).

2. Superstructure rehabilitation works Include the purchase and installation of rails, sleepers, fastenings, ballast and switche on about 638 km of sain line in S-2 and 953 km in SR-5, at an estimated cost of US$74.5 million and US$73.1 million respectively, and represent 36Z of the total project cost. RPFSA's program of selective track renewal in the two corridors focuses upon sections whose present conditions would not provlde rellabillty and safety for the forecast traffic. Heavier welded rails (57 kg/= and 45 kg/u) will be used on specific sections where rail wear is high and on sharp curves, and the recovered rails, if suitable, will be used In sidings. The program also calls for substantial sleeper replacemeat with treated timber sleepers, now fastenLng. In some sections and recompositlon of the ballast bed. In the work program, preference will be glven to sections with heavy traffic and where derailments due to poor track conditions are frequent. A sumary of the condition of the track before and after the project is shown In Table A of this Annex. The rehabllitation program is shown in Table B.

3. Track plant and machinery comprises the purchase and installation of track maintenance machinery and equipment (Table C) to improve the standards of track maintenance, to cater to the increased speed and traffic requirements, and to maximize capacity on the sections to be rehabilitated. Some of the machinery is additional to the existing complement and some ls for replacement. Also, the rail welding plant at Apucarana (Rio Verde), sleeper treatment plants at Azurita, Goiania and Ponta Grossa (Caracara) and the permanent way workshops at Divinopo- lie, Sete Lagoas and Curitiba need additional equipment to cope with the increasing demandfor welded rails and treated sleepers needed for the rehabilitation -76- ANNEX3 program. The estimated cost of this equipment is US$10.9 for SR-2 and US$11.1 for SR-5, including contingencies, and it represents about 5X of the total project cost.

B. Signaling and Telecomnilcations Systems

4. Telecommunications. The existing block and telecommunications systems are worked mostly through bare open-wire lines with some channels rented from the national telephone and telegraph system to supplement. The open-wire lines are unreliable and fault-prone under adverse weather conditions. In addition, the mountainous terrain makes repair difficult, increasing the Mean Time to RPpair. The rental charges for the channels from the national network are very high, and the rents are payable even for the periods when the channels are faulty. The bottleneck sections need more reliable telecommunications channels for better operations and for the safety circuits such as the block system.

5. The telecommunications desiga on both SR-2 and SR-5 provides for an end- to-end microwave-bearer of about 120-channel capacity. These microwave channels would provide for (a) omnibus sections control circuits linking the traffic con- troller with every station; (b) a train ordering or deputy control circuit purely for train orderirg purposes; (c) a power control circuit linking the power and running wing of the regional headquarters with the locomotive sheds; (d) administrative trunk circuits; and (e) a track maintenance circuit. In addition there will be channels for interlinking VHF and UHF spurs for (i) train radio communication between the driver's cab and the control office on a selective call circuit; (ii) data transmission for the OIS; and (iii) radio-controlledblock. In SR-2, the microwave, with its VUF/UHF spurs, will cover the entire Costa Lacerda-Sete Lagoas main line route, but the Belo Horizonte-Divinopolissection will have pnly the VRF/UHF links for the section control of the radio controlled block and of train radio communication. In SR-5, the microwave saytem with all its ancilla- ries will be extended from Uvaranas to Paranagua. The proposed workr. contemplated in the project have been estimated to cost about US$13.1 million and US$12.0 million in SR-2 and SR-5 respectively.

6. Signaling. The crossing stations on the two bottleneck sections in SR-2 and SR-5 do not have any interlocking or safety equipment on the facing points. There are several cases of derailments on facing points due to the lack of such equipment. Most of the stations have only fixed warning boards at the approach of stations, while some stations have semaphore signals operated from a mechanical lever frame. The absence of approach and starting signals constitutes a safety hazard which could result in costly accidents. Besides, the time needed for the reception, dispatch and crossing of trains is nearly five times more with this inadequate signaling than with a standard of signaling commensuratewith the heavy traffic on these sections.

7. The signaling design provides for three standards of signaling related to the traffic density and line capacity. The system is designed on a modular principle, adding superior modules to upgrade the systen in graduated steps. In SR-2, the Sete Lagoas-Leopoldao-CapitaoEduardo section is provided only with spring switches and radio-controlledblock; the Sabara-CostaLacerda and Sabara- Horto Florestal sections are provided with relay interlockingat crossing stations -77- ANNEX 3 and a supervisory traffic control (CTS) which affords a certain degree of centralization of commands and indications without the complexities of full-fledged centralized traffic control (CTC). The modular design would permit future upgrada- tion stage by stage without any retirement of existing modules. In Sk-5, the design consists of: Uvaranas-Apucaranaspring switch signaling; Morretes-Paranagua switches and radio controlled block; Morretes-Iguacu-EngenheiroBley-Uvaranas, relay interlockingwith supervisory remot3 control. Costs are estimated at US$12.9 million for SR-2 and US$26.1 million for SR-5. The signaling and telecommunications components together represent 17% of the total cost of the project. The details of the desig.s on both systems are shown in the attached Chart IBRD 27151.

C. Yards and Workshops

8. The project includes the construction of two new marshaling yards, one near Mathias Leme (Patio Oeste) with a trackage of 9 km in SR-2, and the other in Rio Negro with 6 km of lines in SR-5. It also includes tAe expansion and rehabilitation of about 20.1 km of tracka in five main yards in SR-2 and about 3.4 km of tracks in four main yards in SR-5. In addition, nine station buildings would be rehabilitated, and some freight handling equipment for these marshaling yards would be purchased to facilitate traffic operations. Costs, including price contingencies, amount to US$6.4 million in SR-2 and US$4.2 million in SR-5.

9. During the last part of the 1970s, RFFSA made an attempt to start a program for the rationalization (or centralization)of its workshops. However, little progress was achieved because of the regional structure of RFFSA's organization. RFFSA has recognized the need to continue this program and wishes to improve its workshop facilities through limited investments in the two corridors. This project component calls for the construction of one new fueling facility (Roncador Novo), four new locomotive fueling and servicing installations (P. Leo- poldo, Araguari, Apucarana and Iguacu), two wagon maintenance facilities (P. Leo- poldo and Araguari) and the upgrading of four wagon maintenance facilities to the spot repair system at a total cost of about US$4.8 million. The component also includes replacement of - and additional - machinery and equipment to improve productivity in the workshops, at an estimated base cost of USe'4.7million (Table D of this Annex).

10. The above investments will be paralleledwith the closure of at least eight locomotive and eight wagon repair facilities in the two corridors. The closure and consolidation of the facilities would lead to labor rc:iction (about 150 men) and to savings related to faster maintenance service. It ias been estimated that, on the average, the number of locomotives that are out of service for mainten nce will reduce by about 10 and the wagons by 19. The major changes that RFFSA has to introduce are: (a) the implementation of a management control to permit timely supply of spare parts be.ween SR-3 and SR-2 regiocns;(b) establishment of a pooling arrangement for locomotives to haul trains between Curitiba or Uvaranas and Porto Alegre, thus eliminating the need for a maintenat.te. and fueling facility at Lages and improving utilization of locomotives between SR-5 and SR-6 in the above pool; locomotives requiring wheel truing could be moved to -.he workshops at Porto Alegre; and (c) the implementationof on-spot wagon repair L'cil- ity to be established at strategic points to deal with light repairs. - 78 - ANNEX 3

D. Faclities

11. The project includes the construction of eight silos to improve trans- shipments of grains and grain products upcountry, and to enable RFPSA to operate unit-through-trains between these facilities and the processing centers and/or the ports. In the Goias-Minas Gerais corridor, four silos of the following static capacities would be built in Brasilia (30,000 tons), Goiania and Engenheiro Castilho (40,000 tons each) and Patrocinlo (10,000 tons); in the Parana corridor, four silos would also be built in Maringa and Laudrina (40,000 tons each), in Guara-puarea (20,000 tons) and in Apucasana (10,000 tons). They would be horizontal silos of a modular design consisting of 20,000-ton and 10,000-ton modules, including the necessary cleaning and drying machinery (of a 40-ton/hour capacity), loading and unloading equipment (of a 100-ton/hour capacity), and weighing and ancillary equipment. The costs of the components, including pk:,sical and price contingencies, are estimated at about US$16.8 million for the Goias-Minas Gerais corridor, and at about US$15.0 million for the Parana corridor; together they represent about 8% of the total cost of the project.

May 1985 822L Ft8AA. *A3LV4Y- UL u ttlI3EM - MWlUT T,ruk CmditttI boy "Alm

-'-----''------s--e------~---P9tt t S E T coC h D I T I O ------V I I t A U L A * t AC4------A C

t a tt *t I O 11 -- ge ifefl' tt81h 1 Fast s 34111att No. Of perail4Sets Stelooqt Sted 3t11s S ptaers Fasltnimss littalt Ieed Lo2ath

A to0Ka VA 9gIa 42$1 p25% Type olepced Caoditlon Type Condmlmon P.8 total TotaLt type to.lcA Kalb Kg/a Type Wo.It Type *$Z/ rA*/ Ka

lit-2

SU-tampeeImIm 9~~~~~~43-99045 21 - 200 p 0 Ioe I t0o8o . 34 As ti,st. 3 5 54 Pa1paoIm-t-b1 z100-3l2 t11t 37 )2 44 P 0 hors 20 24 as 29 is U seil. So 90 tbhia-CGta4d MCis. S03-7812 119 31 IS43 89 rP 0 Vora 75 84 10t as1 43 a* S ' 4S15 P 00"g^'5 di tttoals-311n.poag 403-7tS4t1 42 S31543 31 42S100 t r It 7t1kEr 10 * it3 to 14 ot s1t sopolt6-ltminaas p01-i 74-J°O1 -0 I's5 OM/4/1 tH8 32 7/r/T Al zt t X 355 3 O6, , w 2s2NN5 s54S MTs4 , It Ilot;r*As,plta 8-2 Aftur-Rabireta23 4I/31 A1 53 7 AS va Rt to ,07 21 55J 1is 64 V 55 4 Total rOt.l~ ~~~~~~~~~~~~~~~~~~sis t l at 21131 0 1 ~~~ 9

ftl&Lt lit, t 3 0 ornt .433 1 3.133 laut. is Cei. Carnetto-5A 1 4 1-SI? ft I t'O - hlant. 1 32 1£2 32 1 2

tSara-I. un. C ay ot de yacocil - CpU. Cd .o. a r d 582-64S190 - O0t 1ttatsleX4fi-"dS-o7061 14 *S/5737 2001Elast.3oO2SS00 --- */itian.7/f l o o r. 1r29I Vay3oWar" 3*0n 2e 1 1 .8 S0 28 SI 1.8sO0Sal 33 I itt . ) krao deoCccalb-c. Lei,da 444-649 371-too T/tlaAt. I I/rn * 1 3 *i I1 8Xi3 aId 31 S 35 l.5330 1550t41 .' S Cap. Iduar4a-Vqi9pigao 001-421 20 43/17 too IDaO t. ItlO2 _A 3 I0 2 42 " ' 2.33 *S 11 . ' S3 1 0 slee I Yiipaali.a-Vidp. u,I-O eld. 62 1-848 21 43/*S 9 00 - l l a nt. 29 re d. " I 3I a .1. . ,1 fIslt4d 10Id.-2teIlhspo^ 048-433 20 S3131 100 - /hut. 1 Vera 0 so S 11.430 l.oa. 1 5 Cc.ct4TotzlF ISIfdit4 Tils. 3 onS Sl-40 1315 ' 7S ls.5 1'0 Nalahlnh.g-P^rad.nt, Nirati *018-812 12o24 43/31 300 - tiltiit.T1 I.S323 -u. 3*S 20 2.350 31 4T 3 33 Prede,at. V.1l4-1et.1 L180g5 671-624 22 31/31 Icon Tittiat. 33 fi Wera .030 31 31 2.330 .212t3. 3 I Totla 283 02 114 13 344

th^een^"-tego a*@*1w111ey l? 5Z 3 9Z 7 30 xb~~~~~~~~~~~~~~~WrCt§ a4 24 2 flat. SSi 1j

3 4iAS 8 1 33 lalisuazodo-Apaeavs 231-216 SS 31 - 300 T weinr e2 3 s 1 3 4311 r 3i 14r1-12 46 3I - 200 T n 2 Wortr | 2 4 n Aentear~ans-K&1Apuesw10d14a14 582-510 43 37/45 - 30I730 en 3 1 35 43S T SS3 41 lao...ljvo,amai 323~~~II-212232 43 63 27 7 St VeitOI 332437* 3 22 IIe£rana.-lpga.hey lOtill 02~~~6 31 3 91 1 30 Vr jA 24 Si *~ 3 4 Ion.3o 7 l7 Z s 111-13 30 AS 90 20 1 80 WarS 22 33u * 31 I Ss3 30 laneIlii4tiaeapl* * .. r313 Ii

r rehuai- Fe raa a.a 302-4 It 43 44 is T 200 War. . 30 2a1s 43 551 55 is so Ifdrrilia-Parae4..a 40-4, ii 43 99 q9 1 23 21 45 T 35 32 rates 10 21 II? 23

P1n3a1l1~l.~4oa,.n~u339-249 230 63/11 97 3 7 10 v,r, ~ 2 If21 33 III ~ *3/31 uIlr3.I 31 104 slay-KnitsIt1 0.02 42 41 04 2 T 42 Woe 14.2 2 330 ofn-Lag.a 2~~~~~~~~~-290292 43/57 49.s 0.31 y va,Wort 23 2 1323

Total 444 1 fiP 2 1 14 7

bLtte1IP spi4*gl I . *rnv oo34eil U1111 *ae1ltifotlo.t,oss lafeOt l 4871 end isiin tbtIeas3a.

81,1 983 80- ANNEX 3

bEAZfl. TABLE B

FEDEAL RAXLVAT- WOP COUIOK - PU cr

Ttak Eha2bjJltatiaa PegrW 198S-1989

1985 1986 1987 1988 1989 Total Region Lines (Track-Km)

SR-2 Lot No.1 - 30 42 22 36 130

EYX-Patrocinio Patrocinio-Ibia

Loc No.2 20 30 69 24 - 143

Ibia-Gar,aa de Minas

Lot lo. 3 22 19 29 124 25 219

Carvas de MInas-Divinopoils Diwinopolia- Itauna Itauna-Azurita Azurica-Embi ruu _ _ Sub-Total 42 9 140 T70 61 S92

Route 16

Lot lo. 4 10 26 44 44 22 146

Sete Lagoas-C. Lacerda Sub-total 10 26 44 44 22 146

Total SR-2 52 ThI 184 214 83 638

SR-5 Route 5

Lot No. 5 - - 22 33 46 101

Paissandu-Londrina

Route No. 6 16 56 107 86 - 265

Apuca rana-Uv aranas

Lot No. 7 16 30 26 20 - 92

Uvaranas-Ara nca ria

Lot No. 8 4 20 26 38 19 107

Arancaria-Paranagua _ _ Sub-cotal 36 106 181 177 65 565

Route 10

Lot o. 9 7 20 39 38 - 104

Pinhalzinho-Uvaranas

Lot 4o. 10 - - - 10 40 50

Eng. BLey-Mafra

Lot No. 11 24 58 86 66 - 234

Mafra-Lages Sub-total 31 78 T25 Tl14 40 3 Tocal SR-S 67 184 306 291 105 953

GRANDTOTAL U19 289 490 505 188 1,591

Source: RFFSA and Misston Estimates

March 1985 - 81 - ANNEX 3

Umaw. TABLE C

133L RAMIWAT-mOST CORRU0. - JE

Tra KMcbMer-y a_ Track plac wqmipant to be Pbrchsad

Estlmated le_ Quantity Baae Coat Us5 (000)

1. Track Machinery and Equipete

1.1 Motorized inspection cars 807.0 1.2 Notcrized gang can Incl. 2 trolleys) Jo 2.690.0 1.31 otrocized large gang cars (mcL. 2 trolleym) 5 1.066.4 1.4 Motorszed car for aiding (inctl. 2 trolleys) 4 35.6 1.5 otoarized gang car for equlpment 72.0 l1. Portable gantry & 61.2 1.7 Portable taping sec 15 14180.0 1.8 Sleeper drillng unit 8Z 287.0 1.9 tall cucctng machine 42 75.6 1.10 Rail driliLng machine 43 55.9 1.11 Rail grtnder 9 17.1 I.IZ Fribbolc srrewing unic 27 129.6 1.13 Screw splke drivtng unit 147 705.6 1.14 Frshbolt/spike driviag untc 33 115.5 1.13 NydraulIc tcretching unit 8 52.8 1.16 RaLl lubricacors 150 285.0 1.17 Track gauge 73 109.5 1.18 RalL proftle set 10 25.0 1.19 Track jacks CS cons) 66 19.8 1.20 MIscellaneous equipmnt 127 9 1.21 Track crane 5 [.153.5 1.22 Hydraullc gntry 1°3.o 1.23 Ballast cregulacor 8 1.603.2 1.24 Ballatc caping and levellng unit 13 & 000.0 Sub-cocal ITTo

2. Other Eutpeentc for Earchworks

2.1 Truck Cb.3) 6 132.3 2.2 Sulldozer 5 3 L0.8 2.3 Front end loader 4 233.8 2.3 Recroexcavator 15 1.195.3 2.5 Miscellaneous equipment 291.0 Sub-total 2 1S3.2

Total Track Machinery 15.982.0

3. Plan:nEquipment and Machinery

3.1 Sleeper Impregnation Plant 3.1.1 SLeer planning and drlillng unit 1 .70.0 3.1.2 Forlikft 330.01 3.1.3 Trolleys b4 o3.0 3.1.4 Furnace 2 L00.0 3.1.5 Msacellaneous 241.0 Sub-totaL 1.L84.0

3.2 Pranenc Way Workshops 3.2.1 Ve clc milng machine 1 21.0 3.2.2 Lathe 1 17.0 3.2.3 Universal lathe I 15.0 3.2.4 Drtil L 10.0 3.2.5 N.scellanmous equipment 23.6 Sub-total so..)

3.3 Rail Welding Plant 3.3.1 Crane L 45 .0 3.3.2 Set of gantries 1 250.0 3.3.3 Set of roLlers 1 150.0 3.3.4 MultIpLe rail drdlt 1 280.0 3.3.5 Electric generat. r 1 160.0 3.3.6 Portable gancry I 280.0 3.3.7 Electrical equipmnc 259.0 3.3.8 Miscellaneous aquLtament and tools 445.4 Sub-tocal 2725 ..

Total Plant EquLpmenc 3.525.0

Total TraCk Machinery and Plane Equipment 19.507.0

Source: RFFSA and Mission Esctimace

March IS5 -82- ANNEX 3

TABLE D

FEIRAL RAILWAY- MIPORT CORRIDOR - PROJECE

Workshop Equipment and Tools to be Purchased

Estimated Item Quantity Base Cost USS (000)

Fire prevention system 5 525.0 Sanding equipment, set 3 150.0 Metering system for centralized fuel management 6 78.0 Air compressor 16 192.0 Horizontal lathe 4 63.0 Milling machine 2 60.0 Radial drilling machine 1 30.0 Vertical lathe 1 150.0 Cleaning equipment 1 100.0 Overhead traveling crane 2-ton 2 60.0 Forklift 7 211.0 Bench valve brake tester 4 105.0 Shear 1 200.0 Hose banding machine 1 20.0 Bending pressing machine 4 188.0 Electric jacks 25-ton, set 4 112.0 Wagon repair truck 4 320.0 Wheel press 1 100.0 Cleaning equipment for parts 1 100.0 Pneumatic tools, set 21 203.0 Tractor 2 180.0 Electronic circuit board tester 1 105.0 Tools for turbo overhaul 1 273.0 Electronic equipment, set 2 23.0 Undercutter commutator 2 40.0 Measuring table 1 45.0 Torque wrench, set 12 52.0 Vacuum impregnator 1 400.0 Jib crane 5 27.0 Centralized oxygen system 2 26.0 Centralized acecylene system 3 44.0 Parts for fueling equipment 105 39.0 Car pooler 2 200.0 Manual tools, set 20 17.0 Miscellaneous equipment - 284.0 Total 4,72.0

Source: RFFSA and Mission Estimates

March 1985 - 83 -

RAJLWAYEKPORT CORRIDOR PROJECT Telecommunlcattnr and Signaling Design for the Coiddon

SR-2MINAS4OIAS CORRIDOR

. S2fT1 (Dim)

'. [E1 ~~~~~~~~~~~44wn

ldO kkm jnt 8km BQtm (13 mJ) 4km (3Im) (2 ONa) 91t (15 gm)

b-~~~~~fl S -St ,s-r Gecmd.kmH00 7en I o__ ___ cML

a~~~~~~~~~~~~~~~m

8R-8PARANA CORRIDOR

AAU uW(

S, a Sat 9s1 Ftql5~~~~~~~~( Wos)2n

rea -q Wad Uw-27151wu ,ts

.;~~~~~~~~~~~~~~~~~~~~~~~~7 - 84 - ANNEX4

BZIL

FEDERALRAILWAY - EXPORT CORRIDOR - PROJECT

Fianucl*al Forecast Assumptions

General

1. The financial forecasts are based upon constant (March 1985) values (Tables 4.1, 4.3, and 4.5 of the report). For the purpose of comparison, the operating results for 1979-1984 are also shown in the same constant values. Both the past and the forecast Income Statements and the forecast Balance Sheets exclude the results of the now separated commuter service. To develop the next five years' forecasts, the following major assumptions have been considered in addition to the railway's past financial performance and the 1985 budget.

Traffic and Revenues

2. Traffic data are shown in Table 2.1 of the report, and Annex 2 summarizes the rationala for developing the traffic forecast. For freight revenue calculatio4s, current tariff structures have been adjusted as follows: (a) tariffs for commodities that can be carried in unit trains have been reduced by 2%; (b) tariffs for commodities to be carried in mixed trains have been increased by 2%; and (c) the 1984 year end tariff levels have been increased by 1OZ from February 1985. For passenger revenues, the average tariff applicable to the entire RFFSA network has been used; for the freight revenue calculations, the average revenues per traffic unit experienced in the different regions have been applied separately to each region's forecast traffic. In calculating the normalization payments, the present formula (para. 2.15 of the report) has been used. In 1985 and 1986 the Government is expected to pay 50% of the normalization, the outstanding 50% is forecast to be paid in equal amounts in the following three years.

Costs

3. The cost projections are based upon operating conditions related to the traffic forecast and being adjusted to reflect the savings and improvements in productivity resulting from the next five years' investments and action plans. Where past costs were the basis for (or materially influenced) the projections adjustments were introduced in order to avoid possible distortions due to past budgetary constraints (e.g., deferred maintenance).

(a) Personnel costs - for 1985, 1986 and 1987, an overall salary adjustment of 0.6% per annum has been projected to reflect increases due to merlt and longer service, and for the mechanical maintenance staff, a 0.9% additional annual salary increase to reflect increased productivity. Both for 1988 and in 1989, the salaries have been increased by 2.5%. Numbers of employees have been projected separately for the main areas as follows: (i) administration, no increase between 1984 and 1989; (ii) track maintenance, about 16% reduction by 1989; (iii) mechanical maintenance, about 6% increase by 1989 and (iv) operation, train crews are projected to inerease by 2% per annum, and station staff would reduce by 2% per annum. -85- ANNEX4

(b) Fuel cost was based upon September 1984 prices and upon the current consumption rate, adjusted gradually up to 8Z, to reflect the mwre efficieat fuel usage of the unit trains. No price changes were projected.

(c) Spare parts and material costs were based upon the 1980-1982 annual average (in 1983 and 1984, considerable maintenance works were deferred), and it was assumed that 25Z of the expenditure is rollingstock-related and 75% is track component. For the projections, the track component was kept as constant, and the cost of material for rolling stock was increased by 2.1Z per annum in line with the estimated increase in locomotive-km (about half of the forecast increase in TKUs).

{d) Contract work costs were based upon the 1980-1982 annual average and increased by 2Z per annum to account for additional traffic.

(e) Other costs were based upon the 1980-1982 for annual average and, to reflect additional traffic, were increased by 0.5% per annum.

(f) Depreciation costs were projected on the assumption that asset revaluation will be completed by mid-1986. For adjusting the asset values, the differeaces between (past) actual inflation rates and the indexes used in RFFSA's books for adjustments were applied. The following annual depreciation rates were applied to the various asset categories:

Superstructure - 3.3% Infrastructure - 2.0% Locomotive - 5.9% RollingStock - 4.0% Equipment - 10.0% Other - 5.0z

(g) Interest costs were based upon the following assumptions:

(i) Borrowing from the Bank - 15-year loan (including three-year grace period) at 9.5% interest rate;

(ii) Borrowing from BNDES - ten-year loan (including two-year grace period) at 10% interest rate; and

(iiI) Borrowing from other sources - nine-year loan (including four-year grace period) at 11% interest rate.

The projections do not include any financial charges related to the Government's capital co-.tribution.

May 1985 -86- ANNEX5

IUEAL RA_lM - 0OE? COEIDO - 1mDJU=

Ecoemic l of the T Crridor Projects

1. The Goias-Minas Gerais corridor and the Parana corridor project. were evaluated separately, following the same methodology. The two corridor systms were defined a networks of rail links (30 and 25 links respectively) and corresponding road links,, rail and lntermodal terminals, and intermediate rail marshaling yards. The present and forecast transport demand, which is described In Annex 2, was organized into origin-destination commodity flows, consistently with the definition of the networks. Comodity flows were allocated onto the networks, in both alternatives without and with the proposed projects, on the basis of the least user cost transport solution, consistently with DFFSA's marketing action plans. For that purpose, train and yard operations plans were prepared, aiming at optimizing railway operations in both alternatives. The commodity flows which would not be allocated to the railway corridor in either alternative were not considered in the analysis. Annex 2 gives a summary of the traffic allocated to the railway. 2. The components of the transport costs which would be substantially affected by the proposed projects were calculated on the basis of the above operations plans* They include train operating and capital costs, rail terminal and intermediate yard costs, rail track maintenance differential costs, and road transport differential costs, including truck operation and capital and road Coste.

3. The train operating and capital costs were calculated link by link, on the basis of operating parameters derived from the operations plans. They include estimates of the fuel, crew, locomotive and wagon maintenance, and locomotive and wagon capital cost componentss Fuel costs were derived from an average consumption per traffic (gross ton-km) unit available for each link, and from the CIF price of dlesel-oll at Santos plus appropriate distribution coast. Crew costs were estimated on the basis of an average cost per train-hour obtained from RFFSA's cost data. Locomotive and maintenance variable costs were calculated from an average unit cost per vehicle-km, also obtained from RFFSA's cost data. Locomo- tive and wagon capital costs were based upon average unit costs, taking into account the impact of the proposed investments upon vehicle utilisation. 4. For the purpose of costing terminal and intermediate marshaling operations, the yards were categorized, depending upon their major functions, Into grain prodact and other specialized terminals, mized cargo terminals and intermediate yards. Aerage unit costs of yard operatLons were estimated on the basis of operations plans parameters, including operating mnd capital cost of switchers, capital cost of wagons based upon average waiting ties, and the coat of labor and materials for yard operation and maintenance. - 87 - ANNEX5

5. In order to calculate track maintenance costs, rail links were, in both alternatives without and with the project, categorized into four ranges of gross- ton traffic density, three levels of track maintenance condition and two levels of infrastructure condition. For each track category, a maintenance program was definedas necessary to keep the condition of the track over a 20-year period at the averagelevel of the category. Correspondingwork quantitiesand costs were estimatedon the basis of RFFSA's cost data, and appliedto the network. 6. The differencesin road transportrequirements stem from commodityflows which would be rail traffic in the with-project alternative but would be met by truck in the without-project alternative, as a result of comparative efficiency or limited railway capacity; and, to a lesser extent, from the additional road transport distances to the railway terminals in the with-project alternative resulting from the proposedconsolidatlon of railwaystatlons Into fewer terminals. Average truck operatingand capital costs and averageroad costs were estimatedon the basis of vehiclecharacteristics and operatingparameters and road condition obtained through field surveys, and by using GEIPOT's data base on road transport costs and the Highway Design Model 3. B. Corridor Prolect Bvaluation

7. The following table summarizes the main results of the cost calculations. - 88 - ANNEX 5

Corridor Project Evaluatlon Data Sum ry

1990 2000 Without With Without With Project Project Diff. Project Project Diff.

A. Parana Corridor

1. Annual Costs (US$ million)

- train operating & capital 91.6 114.4 -22.8 91.6 150.7 -59.1 - yard operating 54.7 65.2 -10.5 54.7 82.5 -27.8 - track maintenance 32.7 18.7 +14.0 32.7 13.6 +19.1

Subtotal rail costs 179.0 198.3 -19.3 179.0 246.8 -67.8

- road operatirg & capital 70.8 3.8 +67.0 133.8 6.8 +127.0

Total Cost 149.8 202.1 47.7 312.8 253.6 59.2

2. Average Unit Costs

- train (US cents/ton-k_) 2.0 1.7 2.0 1.7 - terminal (US$/ton) 2.0 1.7 2.0 1.7 - road costs (US cents/ton km) 3.0 3.0 3.0 3.0

B. Coias-MinasGerals Corridor

1. Annual Costs (US$ million)

- train operating & capital 81.6 101.6 -20.0 81.6 164.7 -83.1 - yard operating 33.0 37.8 - 4.8 33.0 56.6 -23.6 - track maintenance 26.9 16.4 +10.5 26.9 19.2 + 7.7

Subtotal rail costs 141.5 155.8 -14.3 141.5 240.5 -99.0 - road operating & capital 40.9 2.8 38.1 151.7 8.4 143.3

rotal Cost 182.4 158.6 +23.8 293.2 248.9 44.3

2. Average Unit Costs

- train (US cents/ton-km) 2.4 2.2 2.4 2.2 - terminal (US$/ton) 1.5 1.2 1.5 1.2 - road costs (US cents/ton km) 3.2 3.2 3.2 3.2 -89 - ANNEX5

8. The correspondingannual flows of costs and benefitsare shown hereafter (they are linearlyinterpolated between 1990 and 2000 and assumedto remain constant thereafter, up to year 2004), together with the estimated Net Present Value of the benefits discounted at a rate of 12Z and the estimated internal rates of return of the projects. Three sensitivity analyses were made: in the first, traffic was assumed to be 20% lower than the base forecast over the entire period of analysis;in the second,investment costs were assumedto be 15% higher than in the base estimate,and malntenancecost-savings were reducedby 20Z; the third analysiscombines the assumptionsof the first two.

v-.unti of tbeOxcndwr ftxit=s (8S$ELlUon equLvalext)

------Co ias-MInsGeziis Corddor Project~- 1-ramCDrdor Proect- Ran Road Rai Rail Hod Rai Year OperatinCost Cost Mblt. Cerating Cost Maini. miii. Year Invest. Witoiut With DLff. 11ff. Total Invest. Withxt With DLff. D1ff. Total 1985 -11.7 -11.7 -14.3 -14.3 1986 -26.0 -26.0 -31.4 -31.4 1987 -42.4 87.4 92.4 5.0 2.1 -40.3 -47.7 127.5 134.1 5.0 2.8 -46.6 1988 -38.1 96.5 106.4 12.6 4.2 -31.2 -44.6 133.7 147.1 18.4 5.6 -33.9 1989 -13.8 105.5 120.5 20.2 6.3 - 2.2 -17.3 140.0 160.0 31.8 8.4 2.9 1990 114.6 139.4 38.1 10.5 23.8 146.3 179.6 67.0 14.0 47.7 2000 114.6 221.3 143.3 7.7 44.3 146.3 233.2 127.0 19.1 59.2 2004 114.6 221.3 143.3 7.7 44.3 146.3 233.2 127.0 19.1 59.2

Asmx fXiak NfV (US$) IRR Nv (US)

Base 48.1 0.18 114.2 0.24 Traffic - M% 28.4 0.16 84.1 0.21 investment +15%,Maint. +2M 25.4 0.15 83.0 0.20 Both 5.8 0.13 52.9 0.17 -90- ANNEX5

C. SIxaalI= wetm aat

9. The proposed signaling iuvestments for the Sete Lagoas-Costa Lacerda and Uvaranas-Paranagua sections have also been evaluated separately, following the*same uethodology as described in Section A. In the without- signaling alternative, it was assumed that all other project investments were made. Since the proposed telecowuuications systems would be partly used for traffic control purposes, elements of the telecommunications investments (about 30Z in cost terms) were included in the evaluation. The annual costs of operation and maintenance of the systems have been estimated at about 102 of the investment cost. Quantified benefits include reductions of train operating and capital costs on the controlled section, resulting from reduced delays for train crossing and savings in staff at crossing stations, and benefits from increased line capacity.

10. The corresponding annual flows of costs and benefits are shown hereafter for base cost and traffic estimates, together with the estimated Net Present Value of the benefits discounted at a rate of 12%, and the estimated internal rates of rerurn of the proposed signaling systems for the two corridors. The sensitivity anAlyses were made under the same assumptions as those used for the overall project evaluation.

--OO-in eas Corio rka CorrLc.- Ral RPxd RaLL RaL Roed Rail Year opeCtbsg ost Cost maint. QPmi Cout mait. Hirt. Year Ivest. WLit Wth Lff. Miff. Total est. Wile With mff. DLff. TtaL 195 0.0 0.0 0.0 0.0 1986 -1.5 -1.5 -2.9 -2.9 187 -5.0 -5.0 -7.8 -7.8 1988 -6.3 -6.3 -10.0 -10.0 189 -0.6 -0.6 -1.1 -1.1 1990 2L0 27.5 8.9 -1.2 2.2 24.8 34.5 22.1 -2.2 10.2 2X00 22.0 44.6 33.0 -1.2 9.2 24.8 45.4 41.7 -2.2 18.9 2004 22.0 44.6 33.0 -1.2 9.2 24.8 45.4 41.7 -2.2 18.9

WV (IBS) mm NWV(USS) MR

Base L2.1 0.24 40.3 0.35 Traffic- 2)2 6.9 0.19 27.6 0.29 Inetmsint +15, Haint. +20Z 9.8 0.21 36.4 0.31 Both 6.5 0.18 27.0 0.27 -91- ANME 5

D. bIecomnicatiom Iuw.utct Kvaluwtiom

11. The economic benefits expected from the proposed telecomumiications systems are essentiallyreductions iu the trainoperating and capitalcosts which would resultfrom avoidance of traffic interruptions due to commnication interruptions,from faster assistance to imobilized trains, and from improved managemntof wagons in yards. The correspondingannual flows of costs and benefitsare shown hereafterfor base cost and traffic estimates, together with the estimated Net Present Value of the benefits discounted at a rate of 121 and the estimsted Internal rates of return of the proposed telecomummications systems for the tvo corridors.

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Selected Docunts and Data Available iu the Project We

1. Aide Memoire, RFFSA, Ministry of Transport, Appraisal Mission, December 12, 1984. 2* Decision Memorandum, January 14, 1985.

Consultants' Reports

3. R ESA's Costing and Tariff Systems, R. Carruthers, May 1984. 4. RFFSA's Operations, M. J. Prehn, May 1984. 5. RFFSA's Operations and Management, S. E. Spencer, October 1984. 6. RFFSA's Data Processirag and Communications, W. H. Thompson, January 1985. 7. RFFSA's Motive Power and Rolling Stock, D. Burns, January 1985.

RFFSA' s Publications

8. Relatorio Anual, RFFSA, 1979 through 1984. 9. Estatistica do Transporte, XFFSA, December 1983 through November 1984.

Repc.rts

10. Estudo da Demanda do Transporte Ferroviario, 1984-1990, RFFS& (5 volumes). 11. Demanda Ferroviaria, Perspectivas e Metas de Transporte nos Corredores de Paranagua e Vitoria, REFSA, Novembro 1984. 12. Programa de Modern.,zagao do Sistema RFFSA, Estudo da Demanda, GEIPOT (2 volumes). 13. Programa de Modernizacao do Sistema RFTSA, GEIPOT, Dezembro 1983. 14. Projeto Ferroviario 1984-1990,Bases de A"ao para a RFFSA, RFFSA/Ministerio dos Transportes, Setembro-Outobro1983 (3 volumes). 15. Projeto Eerroviario, Estudo de Viabilidade do Projeto de Restaziragao SR5/RFFSA, GEIPOT, 1984. 16. Projeto Ferroviario, Estudo de Viabilidade do Projeto de Restauragao SR2/RFFSA, GEIPOT, 1984. 17. ADalise Operacional das Principais Rotas da SR2 e da SX5, RFFSA, Setembro 1984. 18. Projeto de Recuperagao da Malha Ferroviaria de Belo Estreita SR2 e SR5, REFFSA, 1984 (4 volumes). 19. Estrategia e Plano de Acao para Melhoria do Material Rodante, RFFSA, Agosto 1984. 20. Eodernizaaao de Locomotivas, Projeto Banco Kundial, RFFSA, Agosto 1984. 21. Modernizarao de Vagoes, Projeto Banco Mundial, RFFSA, Agosto 1984. 22. Oficinas, Projeto Banco Mundial, RFFSA, Novembro 1984. 23. Material de Transporte, Necessidade Fisico-Financeira para 1984-1994, RFFSA, 1984. 24. Facilidades Intermodais, Corredores de Paranagua e Vitoria, RFFSA/Transplan, Novembro 1984; e Informacoes Adicionais, RFFSA, Novembro 1984. 93 ANNEX6

25. Projeto SI.GO, Banco Mumdial, RFFSAi Agosto 1984. 26. Plano para a Implementagao da CBTU, CBTU/Transplan-Metra, Agosto 1984 (2 volumes). 27. Consolidagao Financeira 1985-1989, RFFSA, Janeiro 1985. 28. Ensaio do Esquema Financeiro, XFFSA, 1985-1989. 29. Bases para Determinagao do Esquema Financeiro, 1985-1989, RFFSA, Outobro 1984. 30. Politica Tarifaria, RFFSA, Novembro 1984. 31. Modelo de Apuragao de Custos Operacionais Ferroviarios, RFFSA (3 volimes). 32. Elaboragao, Analise e Avaliagao Economica de Projetos, Vol. VII, RFFSA, 1983. 33. Manual de Estudos de Viabilidade, RPFSA. 34. Diretrizes para Elaboragao de Estudos de Viabilidade, RFFSA, Abril 1985. 35. Programa de Dimensionamento do Parque de Material Rodante, RFFSA, Abril 1985.

Documents for Project Management

36. Plano de Orgars.zaSaopara Ad-1xzistragaodo Projeto, RFFSA, Abril 1985. 37. Plano de Aoao SRl/Recife, 1985-1989, RFFSA, Setembro 1984. 38. Programa de Especializasao, Racionalizagao e Fechamento das Estacoes, Termos de Referencia, RFFSA, Abril 1985. 39. Instrugao Geral para Aplicacao da Normalizagao Contabil, RFFSA, Abril 1985. 40. Estudo de Tarifas, Termos de Referencia, RFFSA, Abril 1985. 41. Plano Diretor para a Implementacao de um Sistema de Informacoes Operacionais, Termos de Referencia, RFFSA, Abril 1985. 42. Programa de Arao, ManutenSaa do Material Rodante, Termos de Referencia, REFSA, Abril 1985. 43. Programa de Agao, ConservaSao da Via Permanente, Termos de Referencia, RFFSA, Margo 1985. 44. Plano de Agao para Refor;o-do Planejamento, Termos de Referencia, RFFSA, 1984. 45. Estudo de um Modelo Gerencial para a RFFSA, Termos de Referencia, RFFSA, 1984. 46. Plano de Desenvolvimento Gerencial, Termos de Referencia, REFSA, Fevereiro 1985. 47. Bases Conceituais para Estudos de Transportes, MT, Fevereiro 1985. 48. Norma Geral de Licitagao e Contratagao, RFFSA.

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