Train man.

Jayme Nicolato Correa runs Brazilian railroad Companhia Ferroviaria do Nordeste (CFN) out of sunny Fortaleza, in northeastern Brazil. His rail line goes through the busiest mineral and agriculture producer states in the country. Output in those regions is only expected to increase, according to consensus estimates. That all depends on rail, so CFN has proposed a new railway, to be called the Nova Transnordestina, which promises to add 30 million tons of carrying capacity and connect north and central states with six ports by 2007. Correa, CFN's president, talked with LATIN TRADE Correspondent Kenneth Rapoza about the proposal and what's at stake.

Describe the Nova Transnordestina rail project.

First of all it's a US$1.50 billion project, including $100 million for rail-port connections and $1.40 billion, mainly on a new, permanent railway. It's essentially a Y-shaped expansion project that is going to connect the ports in Pernambuco and Ceara state with Eliseu Martins in the interior of Piaui state. That's going to give commodity producers access to a whole new shipping lane that they currently don't have. Take a product like ethanol, for example. We're looking at ethanol exports to grow threefold over the next 10 years, but that's not going to happen without the right logistics. The key to the project is the region's productivity. Companhia Siderurgica Nacional, our main institutional shareholder with a 50% stake, supports the idea. China has a proposal in hand. It's going to take a good three years to complete, but the idea is to amplify rail capacity by 30 billion RTK [revenue-ton-kilometers, a metric measuring tons of freight and distance traveled.]

Have logistics problems hurt CFN and its clients?

Insofar as you can't sell your product because you have to rely on bad roads or truck cargo, yes. Today in Brazil, infrastructure is seen as strategic for the country, because new infrastructure development is going to help build new economic and productive centers in the country. Brazil has been mostly dependent on the south and southeast, but that is going to change. How do logistics hurt us? Well, we lose out on shipping opportunities and clients. Our region has 320 days of sun per year compared to 240 days of sun annually in California. We could be the world's biggest producer of animal protein. With good weather conditions, the growth rate of animals like chicken, pigs, shrimp and fish is high. But what stops the northeasterner from benefiting from that fact? It's logistics, I think. Another example:The region has various mineral opportunities awaiting development. Pernambuco has large deposits of gypsum, which is used for making chalk in drywall and also used to make acidic soil neutral, but you can't ship it. The cost is too high.

Commodity producers are saying that the central-west region will quickly outpace the south. Could transportation problems in the north hurt export growth in this region in the near term?

Absolutely. If solutions like the Nova Transnordestina aren't implemented, the country will be impacted. Not only in my region, but principally the central west, which has become a breadbasket in Brazil for farm products, which is where a lot of this economic growth is coming from. This region is our natural integration partner. Without rail expansion, economic growth will suffer.

What are the odds of this project seeing the light of day?

We have the total support of the government and the BNDES [Brazil's state-owned development bank].There's profit to be made here for private shareholders. It's going to create social inclusion in one of the poorest regions in the country and generate jobs because, now, the companies in this region making leather--as an example--can hire more people because they have a means of shipping. That's just one example. There's just no reason this project should not get the go-ahead. We already have the principal investors and the financing.

What about the environmental impacts? Could that slow the project?

The railway is going to cut through areas that won't interfere with the population. It's not cutting through any permanent environmental preservation areas. I think that the project, in the long run, will even be a net benefit for the environment, because one side effect is you can get more use out of ethanol producers there who are going to want to ship domestically and internationally. Biodiesel is another product, and both are clean, cheap, alternative energy sources.

Is CFN going to have intermodal connectivity, mainly rail and road?

We're now working with state governments on this issue to connect rail to road with funds from Banco do Nordeste.

What's the biggest challenge in getting projects like this off the ground?

I think in Brazil the biggest struggle is to develop the country with social equities in mind, with sustainability in mind and social inclusion.