Working on the Railroad.

The Brazilian truckers' strike shows the need for alternative modes of transportation.

FOR SEVERAL DAYS IN LATE JULY, BRAZIL'S PORT OF SANYOS--the biggest and busiest port of all Latin America--was as quiet as a cemetery. Factories throughout the state and most of industrial Brazil were equally silent. No trucks, no cargo. The only thing moving successfully through Sao Paulo was commuter traffic, an uncommon occurrence.

A strike by the country's truckers, upset over sharp increases in fuel prices, among other things, all but paralyzed freight movement for four days until President Fernando Henrique Cardoso threatened to send in troops. It took weeks for factories, stores and traders to catch up.

But the strike had a much more lasting effect: It showed Brazil's dependence on its overburdened and costly trucking system.

The truckers' actions may give Brazil's developing inter-modal industry just the boost it needs. "In a sense, the truck strike was a good thing," says Celina BT Carpi, a director of Rio de Janeiro-based Grupo Libra, a leading Brazilian transportation company. "All the major political players realize there is something wrong with the government strategy and they must rethink it."

Others agree. "We need different modes of transportation," says Carlos Eduardo dos Santos Fernandes, a customs broker for Dakar Comercio Exterior Ltda. in Santos. So says Wady Jasmin, president of the biggest container port operator in Santos: "We should have the same kinds of alternatives as the U.S. East Coast. That includes trucks, trains and sea."

The Brazilian government would like to see that, too. Depending on whose figures you use, truckers carry between 65% to 80% of the cargo moved through the country. Its current strategy calls for private companies to take over the railroads and ports and make them competitors that can cut into the trucking monopoly.

Big sums. But that government strategy has fallen apart as private investment has proven to be too little to improve the alternative transportation systems. "There are just too many investments that are needed for the railroad system that cannot be done by the concessionists," Carpi says. "It's just too much."

Indeed, concession winners--especially those in the railroad industry--are laying quite a bit of their own money on the line. Billions of dollars are being slated for investments over the next couple of years. One of the companies, Ferronorte, recently imported about US$51 million worth of new locomotives from General Electric.

All told, Ferronorte figures to invest over $1 billion. The other major railroad concession winner, Ferroban, plans to invest about half of that, and the third major railroad, Novoeste, is planning to lay down around $200 million.

But more will be needed before the railroad system will become a viable alternative to the roads, which is the government's idea. "It's our plan to increase freight moved on rail," Transport Minister Eliseu Padilha says. Even Clesio Andrade, the president of the Nacional Confederation of Transporters (CNT), which is dominated by trucking companies, says Brazil needs to become more like other world industrial leaders, where trucking accounts for less than half of overall cargo movements and trains carry only a little less than that.

Brazilian rails carry about 21% of the country's cargo. But rail supporters say that number is misleading, because 14% of the overall national freight belongs to steel giant Companhia Vale do Rio Doce, and it is carried on its own rails with its own equipment.

The government seems serious about its support. In August, President Cardoso himself inaugurated a new section of track that Ferronorte opened in the Brazilian state of Mato Grosso between Chapadao do Sul and Alto Taquari. The section was only 250 miles, but it connects to a rail bridge over the Parana River and an existing line leading to the port of Santos. The completed section allows trains to span half the country and link the Brazilian interior to the sea, a dream for the country since the inception of trains.

Play catch up. Indeed, the port of Santos sees even less train cargo than almost any other part of the country. Rail accounted for only about 1.2 million tons, or 3%, of the total 40 million tons moved through the port last year. With so much potential for rail-bound cargo, executives from Ferroban, Ferronorte, Novoeste and other railroads have met with Wagner Rossi, the head of the government port operator, Codesp, to talk about gaining access to rail lines going into the port.

One company has shown what can happen when the rail connection is a good one. Ferromar Express started running containers back and forth between the port and the industrialized band surrounding Sao Paulo. Starting from zero a couple of years ago, the company carried about 12,000 Twenty-Foot Equivalent Units (TEUs) by the end of 1997, which increased an estimated 25% last year. "We know we have to stay ahead," says Edson de Sa, one of the company directors. It helped that early on, the company started working with EDI systems and other state-of-the-art technology.

Ferromar may be ahead for Brazil, but the rest of the country's fledgling rail system has a long way to go just to catch up.