By

Marcos Kleber R Felix

Why Does Brazil Invest So Little in Railways?

Brazil’s chronic underinvestment in railways is not a mere technical issue—it’s a symptom of deep-seated political short-termism. Despite the pressing need to modernize its transport infrastructure, railway investments have steadily declined over the years. In 2014, public spending on railways reached nearly R$2 billion. Fast-forward to 2023, and that figure had shockingly plummeted to just R$70 million—a staggering 28-fold decrease.

This steep decline reflects a troubling pattern in Brazilian governance, where administrations, irrespective of ideology, prioritize short-term projects with immediate electoral appeal. High-profile road construction and social welfare programs consistently overshadow long-term infrastructure initiatives like railways. The political calculus favors what is visible and quick rather than what is sustainable and transformative.

Meanwhile, the private sector has emerged as the backbone of Brazil’s railway investments. In 2023 alone, private companies poured over R$10 billion into the sector—more than 140 times the government’s contribution. While this shift has filled some gaps, it raises important questions: Can the private sector alone shoulder this responsibility? And what are the broader implications of this dynamic for Brazil’s economy?

Public vs. Private Rail Funding: The Fiscal Populism Trap

To better understand the scale of Brazil’s railway underfunding, let’s examine public investment trends. Adjusted for inflation and converted into U.S. dollars, the figures reveal an alarming pattern of neglect:

Public Investment: A Downward Spiral

The table on public investment in Brazil’s railways reveals a sharp and alarming decline in dollar-adjusted terms. In 2014, public investment reached a respectable $820.83 million, which reflected a government commitment to infrastructure. However, this figure nosedived to a mere $12.83 million by 2023—a decrease of over 98%. By 2024, the situation deteriorates even further, with a negligible $3.33 million allocated. This downward trend demonstrates a systematic neglect of railways, leaving the sector unable to modernize and grow at a time when global competitors are increasing their infrastructure budgets.

Source: Ousebem

In stark contrast, the United States allocated nearly $30 billion to railway projects in 2023 alone, spurred by the Bipartisan Infrastructure Law. This comparison highlights the gap in priorities between the two nations.

Private Sector Investments: A Stabilizing Role, But Insufficient

Private sector contributions to Brazil’s railways, while more substantial, also display concerning trends when adjusted for inflation and converted to dollars. In 2014, private investments totaled $2.60 billion, showing a strong involvement in the sector. By 2023, investments rebounded to $1.91 billion after years of decline but still fell short of the early 2010s levels. The 2024 projection of $1.04 billion underscores the fragility of relying solely on private funding.

Though significant, these investments cannot replace public funding, particularly for addressing regional inequalities and comprehensive infrastructure needs. Even Brazil’s private sector, though significantly more invested, has seen its contributions diminish when adjusted for inflation. The following table captures this dynamic:

Source: Ousebem.

The True Costs of Neglect

Brazil’s neglect of its railway infrastructure has far-reaching consequences for its economy and environment. Over 60% of the nation’s freight moves by road, a model that significantly increases logistical costs—estimated at nearly 12% of GDP, far above global benchmarks. This overreliance not only strains the economy but also worsens environmental damage through higher carbon emissions and leads to safety concerns, including a higher incidence of traffic accidents.

Railways, by comparison, provide a cost-effective, sustainable, and safer alternative for long-distance freight, making the underinvestment in this sector a critical missed opportunity. Despite these clear advantages, Brazil’s political class continues to favor short-term, high-visibility projects over the strategic development of its railway network.

Charting a Path Forward

Reversing this trend will require a paradigm shift in Brazil’s infrastructure investment strategy. Public sector involvement remains indispensable, even as private contributions grow. Successful global models, such as the U.S. Bipartisan Infrastructure Law or the EU’s transport co-funding mechanisms, demonstrate that balanced public-private partnerships can deliver transformative results as  The Resurgence of Private Enterprises in American Passenger Railways.

Brazil must adopt transparent policies that align private investments with a cohesive national railway strategy, ensuring infrastructure development is both equitable and sustainable. Railway authorization contracts (autorizações ferroviárias), while promising by streamlining bureaucratic processes and attracting private capital, must be complemented by strategic public funding to address regional disparities and stimulate economic growth.

The future of Brazil’s railways depends on recognizing infrastructure as an investment in national prosperity—not just an expense. The time has come to prioritize railways, private and public, as a cornerstone of Brazil’s development.