All aboard! Brazil's railroads are on an infrastructure spending spree. They're going at it alone.

America Latina Logistica (ALL), a transportation company operating in southern Brazil and Argentina, hit the jackpot in July when it raised US$173 million on the Bovespa, the Sao Paulo stock exchange. ALL's chief operating officer, Bernardo Hees, says the offering will finance operations for the next five years and help purchase 40 locomotives and 1,000 freight cars.

The money will also fund technology investments in a region responsible for 70% of South America's exports and more than half the total gross domestic product of Mercosul, according to ALL's financial statements. "If we make the right investment moves ... we are confident that we can find a way to solve the infrastructure problems and get away from what they call the 'logistics blackout' in Brazil," says Hees.

ALL has connections to ports in Paranagua, Sao Francisco do Sul and Rio Grande and counts Bunge, Cargill, BASF and National Steel (CSN) as customers. Its lines run through southern Brazil, home to nearly 40% of the country's farm exports at a time when railroad and port shortcomings threaten to put the brakes on commodity producers.

Yet, for the company, the future looks bright.

"Six years ago my clients moved by truck only. Now they can do both," Hees says. The company is expected to grow 25% in 2005. Some of ALL's projects for 2005 include building a 100-kilometer line to connect Parana and Mato Grosso do Sul states. Other projects call for rerouting a railroad out of Curitiba, the capital of Parana, and moving it to the outskirts of the city. The company also plans to connect Porto Alegre, the capital of Rio Grande do Sul state, with the port in Rio Grande.

The concessionaires who run Brazil's state-owned railways are not waiting for Brasilia to open its wallet. In 2003, the government didn't invest at all in railways, while private companies sank $138 million into the sector. "We need multi-modal investment connecting rail to road," says Jose Osvaldo Cruz, assistant to the president of Brasil Ferrovias, a holding company operating in the central-west region. The company intends to spend more than $164 million in 2005 on Ferronorte and Ferroban, two railroads in the holding company.

Others are looking at selling equity. like ALL, to finance expansion. "I think ALL was wise to list on the exchange," said Jayme Nicolato Correa, president of Northeastern Rail Company. Correa says his company is considering doing the same by 2008.

Some exporters, however, have already lost faith in rail. A study by researchers at the Federal University of Rio de Janeiro found that 93% of soy exporters say railroad companies are unable to meet their needs, compared to other methods of shipment, mainly cargo trucks.

Investment in the railways is running behind. The Association of Railway Transporters (ANTF) estimates that the sector needs $1.51 billion in spending. The ANTF's three-year proposal sent to Congress earlier in 2004, however, called for just $630.1 million to be spent.

Laying down more tracks in the central-west and northeast, also a hotspot for commodities, tops the investment list, says Jose Augusto Valente, the national policy secretary at the Ministry of Transportation, yet there is only so much authorities can do.

"Our position is to get Brazil back on track, policy-wise, in questions related to transportation infrastructure. We don't want to throw stones at past governments, but policies on railways in the past were totally inadequate," says Valente. "We need to be as creative as possible to finance expansion."

Of course, previous governments weren't facing a sudden export boom, either. Commodities like soy and steel are driving Brazil's exports, which the government projects will top $100 billion by 2006, or maybe even beforehand. The government has previously projected 2004 exports to hit $80 billion, but later raised that forecast to $94 billion.

The only cloud on Brazil's export horizon appears to be logistics. On any given day in Sao Paulo, trucks snarl in traffic as the inch along towards the Congonhas Airport. A 10-mile drive can take over 40 minutes. Elcio Ribeiro, logistics director for the National Association of Grain Exporters blames rail--or lack thereof--for the gridlock. Many railroads pass through shanty towns, where children play on the tracks. "How do you take a high speed train through something like that?" Ribeiro asked executives at a recent industry event. "You simply cannot have a transportation system based on truck transportation if you want to continue exporting," Ribeiro said.

Laws. Some blame Brazilian law for the problem. It's easy to get and hold concessions but railroads have to spend to improve property they can never own. "This is the rule of the game," says Hilario Leonardo Pereira Filho, a regulator at the National Land Transportation Agency. "They knew this before they bought the rail companies." Many logistics companies are making money, Filho says.

Some suggest proceeds from a fuel tax could finance railroad improvements. The railway sector pays $47 million a year in fuel-tax contributions, but companies complain they get none of that back. The ANTF says it deserves some of those tax revenues, since they finance transportation projects. They also fund energy and environmental concerns.

"We want some of these federal resources to return to the sector in critical situations, such as getting trains away from the [slums] that have been built up around these tracks," says Rodrigo Vilaca, executive director at ANTF. "We know public transportation has received money, but it has to get invested in rail logistics, too, if it's going to lessen the dependence on the road."