EUROPE Regulation of logistics infrastructure in Brazil Martin Lodge, Christian Van Stolk, Julia Batistella-Machado, Daniel Schweppenstedde, Martin Stepanek For more information on this publication, visit www.rand.org/t/RR1992 Published by the RAND Corporation, Santa Monica, Calif., and Cambridge, UK © Copyright 2017 RAND Corporation and LSE R® is a registered trademark. RAND Europe is an independent, not-for-profit research organisation whose mission is to improve policy and decision making for the public good. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. 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Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org www.rand.org/randeurope Table of Contents Table of Contents ................................................................................................................................... iii Figures .................................................................................................................................................... iv Tables ...................................................................................................................................................... v Abbreviations .......................................................................................................................................... vi Preface .................................................................................................................................................... ix Executive summary ................................................................................................................................. xi 1. Overview ....................................................................................................................................... 14 2. Regulating logistics infrastructures ................................................................................................. 15 2.1. Common regulatory issues in logistics infrastructure ............................................................. 17 2.2. Regulatory governance challenges ......................................................................................... 17 2.3. Regulatory capacity issues ..................................................................................................... 18 2.4. Public private partnerships and variations in logistic infrastructure projects........................... 19 3. Development of the regulatory framework and recent reform ........................................................ 24 3.1. Development of regulatory framework since mid-1990s ........................................................ 24 3.2. Development of levels of private investment into logistics infrastructure ............................... 25 3.3. Programme for Investment Partnerships (PPI) ...................................................................... 29 4. Regulatory governance ................................................................................................................... 31 5. Regulatory capacity........................................................................................................................ 40 6. Regulatory issues and challenges around logistics infrastructure per sector ..................................... 52 6.1. Unbalanced transportation matrix and inefficiencies in logistics ............................................ 52 6.2. Rail ....................................................................................................................................... 54 6.3. Ports ..................................................................................................................................... 55 6.4. Roads .................................................................................................................................... 57 6.5. Airports ................................................................................................................................ 58 6.6. Cross-cutting themes ............................................................................................................ 59 7. Recommendations: towards a roadmap for enhancing regulation in logistics infrastructure in Brazil .. ...................................................................................................................................................... 65 8. Appendix A – Development of the logistics sector and related infrastructure between 1820s and 1990s ............................................................................................................................................ 67 9. Appendix B – Regulatory issues and challenges in the railway sector .............................................. 69 10. Appendix C – Regulatory issues and challenges in the road sector .................................................. 86 11. Appendix D – Regulatory issues and challenges in the ports sector ................................................ 98 12. Appendix E – Regulatory issues and challenges in the airport sector ............................................. 117 Bibliography......................................................................................................................................... 125 iii Figures Figure 1: Investment in infrastructure as share of GDP; Brazilian Ministry of Finance (2015) ................ 27 Figure 2: Overview of producing areas away from the coast .................................................................... 53 Figure 3: Most problematic factors for doing business – Brazil ............................................................... 64 Figure 4: Map of existing and projected railways .................................................................................... 70 Figure 5: Investment in railroad infrastructure as percentage of GDP ..................................................... 72 Figure 6: Railway network scope, density, market share and velocity ...................................................... 73 Figure 7: Railroad investments and railroad volume over time ................................................................ 77 Figure 8: Main products transported through railways, 2013 .................................................................. 81 Figure 9: Evolution of federal investment in roads over time, Brazil, 1975–2015 ................................... 88 Figure 10: Overview of the Brazilian highway network ........................................................................... 94 Figure 11: Waterway cargo transport volumes in tonnes ......................................................................... 99 Figure 12: Main types of cargo transported by the waterways (2015) .................................................... 100 Figure 13: 2013 changes to regulatory framework for the port sector .................................................... 105 Figure 14: Public-private investment in public seaports over time ........................................................ 106 Figure 15: Port investments over time .................................................................................................. 108 Figure 16: Inland waterway transport ................................................................................................... 116 Figure 17: Cabotage transport .............................................................................................................. 116 Figure 18: Map of airport concessions .................................................................................................. 120 iv Tables Table 1: Typology of regulatory tools ..................................................................................................... 23 Table 2: Phases of development for main Brazilian federal independent regulatory agencies .................. 25 Table 3: Overview of PAC 1 and PAC 2 ................................................................................................ 28 Table 4: Overview of PIL 1 and PIL 2 .................................................................................................... 28 Table 5: Regulatory governance: overview of challenges and proposals ................................................... 39 Table 6: Four regulatory scenarios .......................................................................................................... 42 Table 7: Enhancing regulatory capacities ................................................................................................ 45 Table 8: Tools and regulatory capacities ................................................................................................. 48 Table 9: Regulatory issues and challenges by sector ................................................................................ 61 Table 10: Main products transported