Urban connectivity infrastructure
Urban connectivity infrastructure
Business Model Description
Provide project financing for completion of São Paulo subway
Expected Impact
Shorten commutes for hundreds of thousands Brazilians, alleviate road traffic and benefit businesses along subway lines
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Brazil: São Paulo
Sector Classification
Transportation
Development need
National underinvestment in infrastructure creates particularly high costs in transportation and logistics: Brazil's infrastructure deficiencies cost it between 10-15% of GDP every year, driven primarily by logistics costs close to 15% of GDP (2) Brazil also has one of the most deficient road and railway networks across Latin American peers, BRICS and OECD countries (3)
Policy priority
Continuity in the government's PPI program is expected to create an environment for expanded and improved investment in transportation (15)
The government has also created an agency to consolidate all infrastructure projects, land and maritime (ANT - National Transport Agency) (4)
Gender inequalities and marginalization issues
In Brazil, urban life and vulnerability to violence are particularly challenging for black and low-income women, for whom walking and public transport play a fundamental role in the everyday experience. The 2014 ActionAid’s survey Cidade Segura Para Mulheres (Safe City For Women) revealed that 86% of Brazilian women had already been harassed in public space and 44% on public transport. (6)
Investment opportunities introduction
Government's PPI program is expected to create an environment for expanded and improved investment in transportation (5)
Key bottlenecks introduction
Absence of replicable project financing vehicles, lack of predictability and risk of limited enforcement of long-term contracts
Land Transportation
Development need
Brazil has one of the most deficient road and railway networks across Latin American peers, BRICS and OECD countries (3) The rail network is highly uncompetitive - active lines amount for 20,000 km, a measure that is nearly half of the length of Argentina's rail network, a country which is a third of Brazil's size (10)
Policy priority
The new administration has made freight rail a priority subsector within its PPI investment program (24)
Gender inequalities and marginalization issues
Transit services and facilities must ensure the safety of women and girls. Traveling in public transport without fear of abuse or discrimination should be a priority for transport planning, as safer transport is a crucial element of a livable city. (7)
Investment opportunities introduction
The overall freight railway sector is expected to double in share over the next eight years, up from 15% to 29-30% of the logistics mix, in line with concession schedules (15)
Rail Transportation
Pipeline Opportunity
Urban connectivity infrastructure
Provide project financing for completion of São Paulo subway
Business Case
Market Size and Environment
Over 9 million Brazilians are outside of the public transportation network in São Paulo
Over 9 million people in São Paulo are outside the public transportation network
The estimated combined ridership of these projects is over 2 million people (9)
Investment required to finance the completion of subway lines in São Paulo is over US$ 10 billion (includes metro lines 6, 18 and 20, as well as the intercity train network) (9)
Indicative Return
10% - 15%
The World Bank's completion of subway line 4 in São Paulo had an IRR of 13.8% (14) (15)
Investment Timeframe
Long Term (10+ years)
The World Bank's completion of São Paulo subway metro line 4 took ten years, three more than anticipated (14) (15)
The public-private partnership's duration for this type of projects is usually 25 years (9)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Business - Business Model Unproven
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
75% of the population in São Paulo live outside of the public transportation grid, which contributes to the second highest average commute time in in the world (42 minutes) (8)(11)
Gender & Marginalisation
Urban life and vulnerability to violence are particularly challenging for black and low-income women, for whom walking and public transport play a fundamental role in the everyday experience.
The 2014 ActionAid’s survey Cidade Segura Para Mulheres (Safe City For Women) revealed that 86% of Brazilian women had already been harassed in public space and 44% on public transport. (6)
Expected Development Outcome
Reduce commute times by offering a direct, reliable means of transportation
Integrate populations to the public transport grid. Subway line 6 in São Paulo will serve over 600K commuters (9)
The construction of line 6 will benefit an additional 800K people in the stations' area of influence, mainly by supporting local businesses (9)
Gender & Marginalisation
Increased rail transport opportunities, improving women's access to urban centers and areas of potential employment, reduced violence against women experienced during pedestrian transportation.
Primary SDGs addressed
11.2.1 Proportion of population that has convenient access to public transport, by sex, age and persons with disabilities
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Indirectly impacted stakeholders
Corporates
Outcome Risks
Construction work has required demolishing homes and parts of São Paulo neighborhood Liberdade
Impact Risks
Unexpected impact risk: demolition of neighborhoods due to construction work
Execution risk: lack of predictability and enforcement of long-term contracts may limit breadth of impact
Impact Classification
What
Improved subway network could shorten commutes for hundreds of thousands, alleviate road traffic and benefit businesses along subway lines
Risk
Though the model is proven, factors like the lack of predictability and enforcement of long-term contracts may limit breadth of impact
Impact Thesis
Shorten commutes for hundreds of thousands Brazilians, alleviate road traffic and benefit businesses along subway lines
Enabling Environment
Policy Environment
(State of São Paulo): Expressed desire to expand the subway network, decongest the city, and reach more São Paulo inhabitants (10)
Financial Environment
Financial incentives: The São Paulo State Secretariat for Metropolitan Transport is responsible for financing ~50% of these concessions (9)
Other incentives: BNDES is often a co-funder for subway construction works (9)
Other incentives: BNDES is often a co-funder for subway construction works (9)
Regulatory Environment
(Decree 57,289/2011): Governs infrastructure PPPs, through the Expression of Interest from the Private Sector initiative (MIP) by the São Paulo State Secretariat for Metropolitan Transport (9)
Marketplace Participants
Private Sector
Move São Paulo (consortium formed by Odebrecht, Queiroz Galvão and UTC Participações to start line 6)
Government
São Paulo state government
Multilaterals
The World Bank (has funded subway projects like line 4)
Target Locations
Brazil: São Paulo
References
- (1) Bertelsmann Stiftung, 2019, https://dashboards.sdgindex.org/#/BRA
- (2) IDB Invest, 2018, https://blogs.iadb.org/bidinvest/en/brazil-infrastructure-challenges-opportunities/
- (3) Governo Federal do Brasil, 2015, https://www.epl.gov.br/html/objects/_downloadblob.php?cod_blob=2091
- (4) Folha de São Paulo, 2019, https://www1.folha.uol.com.br/mercado/2019/02/governo-bolsonaro-prepara-superagencia-de-infraestrutura.shtml
- (5) Rio Times, 2019, https://riotimesonline.com/brazil-news/rio-business/brazil-to-start-railroad-concessions-in-first-semester-of-2019/
- (6) Institute for Transportatoin and Development Policy. 2018. ""Women and Children’s Access to the City"" http://itdpbrasil.org.br/wp-content/uploads/2018/01/Women-and-Childrens-Access-to-the-City_ENG-V1_Jun-2018.pdf
- (7) Yadav, Neha. 2016. “Reframing the Issue of Women’s Safety in Public Transport in Brazil and France.” TheCityFix (blog). January 22, 2016. https://thecityfix.com/blog/reframing-issue-women-safety-public-transport-brazil-france-neha-yadav/.
- (8) Viatrolebus, 2019, https://viatrolebus.com.br/2019/03/estado-quer-solucao-para-a-linha-6-laranja-do-metro-ate-agosto/
- (9) Governo do Estado de São Paulo, 2013, http://www.saopauloglobal.sp.gov.br/relacoes_inter/publica/folder_ppp_3-edicao.pdf
- (10)Associação Brasileira da Indústria Ferroviária (ABIFER), 2019, https://abifer.org.br/en/abifer-na-midia-sao-paulo-targets-rail-expansion/
- (11) Instituto de Pesquisa Econômica Aplicada (IPEA), 2013, https://www.econstor.eu/bitstream/10419/90997/1/745113257.pdf
- (12) Deloitte, 2013, http://www.metrorio.com.br/Content/Upload/ArqConteudo/Demonstracoes_Financeiras_2014.pdf
- (13) Escola Politécnica do Estado de São Paulo, 2006, https://www.teses.usp.br/teses/disponiveis/3/3138/tde-07122006-163515/publico/dissertacao_silvio_jose_rosa.pdf
- (14) World Bank, 2013, http://documents.worldbank.org/curated/en/692971474577575098/pdf/000020051-20140625200029.pdf
- (15) World Bank, 2012, http://documents.worldbank.org/curated/en/547441468228275910/pdf/ICR17350P051690C0disclosed070200120.pdf
- (16) BNDES, 2014, https://www.bndes.gov.br/wps/portal/site/home/imprensa/noticias/conteudo/20140626_metrosp
- (17)World Bank “Brazil - Sao Paulo Metro - Line 4 - Project.” https://documents.worldbank.org/en/publication/documents-reports/documentdetail/504331468769492725/Brazil-Sao-Paulo-Metro-Line-4-Project.