News / Pushed by Trump, pulled by China: Brazil's bold new rail freight gamble

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A plan to link both coasts of South America with high-capacity cargo rail lines has gained a shot in the arm, one Brazil freight forwarder told The Loadstar, after recent vitriol over ownership of the Panama Canal.

The ability to transport cargo westward to the Pacific could help to address port congestion, a mounting problem for the Brazilian economy.

Brazil’s ports are “50 years behind the times”, according to one recent report, with the problem coming to a head at Santos, where some 80% of vessels suffered delays of as much as two weeks.

“In peak seasons, delays in loading and berthing can stretch for days, sometimes weeks, especially in key ports like Santos and Paranaguá,” one forwarder told The Loadstar. “It’s not just a logistics issue, I believe it’s a competitiveness issue. When ships wait, costs rise and contracts are strained.”

Now, the Trump administration’s pressure on Panama over operation of its canal – a critical route to Asia for Brazilian cargo – is adding another turn of the vice, the forwarder explained.

“The recent issues in Panama are a clear reminder that we can’t depend on routes outside our control… Brazil needs to focus on building strong internal rail connections and upgrading its own ports if we want long-term competitiveness.”

“Over the past months, using the Panama Canal has been unpredictable,” said a forwarder, “with longer transit times, costs rising, and uncertainty now part of every logistics plan.”

The FICO-FIOL plan has been under development for some years, with assistance from China’s rail experts. The network consists of three components: the Ferrovia de Integração Centro-Oeste (FICO), heading inland from Chancay to reach the central Brazilian municipality of Mara Rosa; the Ferrovia de Integração Oeste-Leste (FIOL), spanning Figueirópolis to Brazil’s Atlantic coast’s Porto Sul; and the north-south railroad that would link the previous components, as well as eventually extending connectivity to the port of Itaqui, in Brazil’s north.

The setup sidesteps one of the main concerns of a trans-Brazilian rail route, deforestation, by travelling over mostly dry and rocky terrain south of the Amazon rainforest and circumventing indigenous territory. One source told Reuters the Chinese had initially proposed a route through the Amazon, which Brazil’s government “firmly rejected”, due to “the presence of the rainforest and indigenous peoples”.

Mr Trump’s latest pronouncement of a 50% tariff on Brazil uniquely bears an explicitly ‘cronyist’ provision – clemency for ex-president and attempted putschist Jair Bolsonaro, “a highly respected leader” in the US president’s eyes – adding further pressure.

Mr Trump called Brazil’s prosecution of Mr Bolsonaro “[an] international disgrace,” claiming that the 50% tariffs represent “far less than what is needed to have the level playing field we must have [with Brazil]”.

Last week, Brazilian supreme court judge Justice Alexandre de Moraes moved to freeze the accounts and assets of Mr Bolsonaro’s son, Eduardo, who lives in the US and is thought to be using money from his father to lobby the Trump administration against Brazil President Luiz Inácio Lula da Silva (‘Lula’).

Mr Lula, meanwhile, claims the US has ignored attempts to negotiate tariffs, which come into effect from August and will affect just 12% of Brazil’s exports by value share, compared with China’s 28%. On the other hand, Brazil, one of few countries with a trade deficit with the US, makes up a commanding proportion of America’s semi-finished iron and steel, pig iron, coffee, and fruit juice imports.

But The Loadstar’s Brazil source did not downplay the severity of the tariffs, saying Brazil would be “absolutely affected”, and that concern was already being seen “across the export chain… estimates point to billions in potential losses” among critical industries.

Mr Trump’s invective, he suggested, was “accelerating the pivot to China” for many Brazilian companies, “…not just as a back-up market, but as a central player in long-term trade strategy”.

Besides rail access, sources say the key to unlocking growth in the Brazilian economy lies in improving its port infrastructure, which would include opening them up to the private sector, while fending off prospective foreign monopolies.

“Brazil needs more, and better, infrastructure that enhances competitiveness, reduces bottlenecks, and supports long-term national development,” said the forwarder. “When it comes to ports, the arrival of companies like CMA CGM and Mærsk brings much-needed investment and international expertise. However, their participation must be properly regulated to avoid excessive market concentration.”

Another source added: “The renewables sector is one of Brazil’s strongest bets for sustainable growth.”

Indeed, Brazil’s renewable energy sector generates more than 80% of grid energy in the country, “a major advantage as the country pushes to modernise logistics”, said the source.

“There is strong potential to integrate renewable energy into the rail sector. The challenge is scaling these solutions beyond isolated projects.

“With solar expanding in the interior and wind farms advancing in the north-east, the next step is connecting this energy to logistics and industrial systems to improve both environmental and economic performance.”