BRAZIL
Published by MAC on 2007-07-28BRAZIL
BNDES finances CVRD railway that transports irregular pig iron from
Pará, Radiobrás, 24/7/2007
By Alana Gandra and Isabela Vieira
A R$ 774.6 million loan approved on the 10th of this month by the National Bank of Economic and Social Development will enable the Carajás Railway Station (EFC), which belongs to Companhia Vale do Rio Doce (CVRD), to almost double its carrying capacity. The railway cuts across several indigenous lands, in a situation being questioned by the Federal Public Prosecutors, and is currently responsible for transporting pig iron produced with illegal charcoal in Pará.
The expansion, from the current 70 million tons a year, will increase capacity of the railway that links the mineral deposits in Carajás to the Ponta da Madeira port in Maranhão, to 103 million tons a year. According to data from CVRD, in 2006, EFC transported a total of 89.4 million tons of cargo. Some 81.6 million tons of this total is iron ore.
BNDES' share in the project to increase EFC transport capacity is 57% of the total investment, which will reach R$ 1.4 billion. The project hopes that an operating licence will soon be issued by the Brazilian Institute of the Environment and Renewable Natural Resources (Ibama).
The Department of the Environment in Pará has been working in conjunction with Ibama and the Federal Police to inspect pig iron producers in the state. The Marabá region alone produces some 2 million tons of pig iron a year, exported over the railway awaiting expansion. All of the companies in the region are currently considered to be operating illegally because they use charcoal from suspicious sources. They have been asking the state government for nine years to correct the situation.
Last year, Vale sold 6 million tons of iron ore to pig iron producers in northern Brazil. In April of this year, Vale do Rio Doce announced it would suspend supply of iron to producers who were noncompliant with labor and environmental legislation in Brazil. Now, to avoid transporting illegal pig iron, Vale has informed that it is reviewing contracts that expire in 2008. The company assures that it will suspend contracts with suppliers who fail to comply with environmental law. It has not, however, said how it intends to confirm compliance.