PERSPECTIVES FOR THE BRAZILIAN RAILWAY INDUSTRY, by Letícia Alencar and Mário Saadi

After approximately two decades without major progress on the Brazilian railway industry, the Logistics Investment Program (PIL - Programa de Investimentos em Logística) was created this year by the Federal Government, in order to provide the expansion and development of railway services in the country.

INFRASTRUCTURE - Letícia Alencar and Mário Saadi

PERSPECTIVES FOR THE BRAZILIAN RAILWAY INDUSTRY

After approximately two decades without major progress on the Brazilian railway industry, the Logistics Investment Program (PIL - Programa de Investimentos em Logística) was created this year by the Federal Government, in order to provide the expansion and development of railway services in the country.

In order to extend the capacity and efficiency of the industry, PIL estimates investments of R$ 91 billion for the next 25 years. Thus, another 10 thousand km of railway networks are expected to be built, maintained and operated by private enterprise, from the concession of 12 new railway sections.

The purpose of the Federal Government is to bid the sections under study in two phases. The first will perform the bidding of 2.6 thousand km, for enterprises such as Ferroanel de São Paulo (São Paulo Ring Railway); the network for the access to the Port of Santos (SP); and sections among Lucas do Rio Verde (MT) and Uruaçu (GO); Estrela D’Oeste (SP), Panorama (SP) and Maracaju (MS); and Açoilândia (MA) and Vila do Conde (PA).

The second phase must perform the bidding of the remaining 7.4 thousand km, comprising the networks among Uruaçu (GO), Corinto (MG) and Campos dos Goytacases; Salvador (BA) and Recife (PE); Rio de Janeiro (RJ), Campos (RJ) and Vitória (ES); Belo Horizonte (MG) and Salvador (BA); Maracaju (MS), Cascavel (PR) and Mafra (SC); and São Paulo (SP) Mafra (SC) and Rio Grande (RS).

The studies related to new railway concessions were already started. It is expected that, by March 2013, all public notices related to projects involved in the first group will be published and, for those of the second, by May 2012. Although the deadlines are extremely tight, the concession model was not officially announced by the Government.

From the legal point of view, any concession methods (common, sponsored or administrative) may be used. Technical and economic-financial studies, carried out by federal entities, will be critical for the definition of the model to be implemented. In any case, the Government is expected to purchase the full installed capacity of the railway and to resell to sectorial players (users, independent railway operators and railway transportation concessionaires), which will ensure a greater competitiveness in the industry.

Thus, the Concessionaire compensation may both come from counterparts made by Public Authorities (subsidies, public considerations or contribution
of resources), and from fees to be paid by users.

The discretion criterion, among others admitted by laws on concessions, may be that of the lower payment amount to be made by one state entity (VALEC, v.g. federal public company liable for the construction and exploration of railway infrastructure).

Such payments must be used as state consideration by the sale, from the concessionaire to the state entity, of the installed capacity of the railway system. Any advanced installment may result in lower costs for financial load and greater attractiveness of the project. The state entity, on its turn, may be compensated
by the assignment for consideration of the installed capacity of the railway system to users, thus ensuring the right of way of trains in all networks and aiming at the tariff modicity.

Anyway, it is hereby understood that, regardless of the adopted model, the Government aims to follow new guidelines in this concession phase, being able to distinguish it from that of the 90s. The explicit purposes of the PIL include the effective breach of monopoly in the offer of railway services, thus enabling the use of the network by various operators, under competition regime. In any case, the premise thereof is the fulfillment of the rights of existing concessionaires.

MINING – Pedro H. Jardim and Talita G. Duarte

Brazil progresses in the regulation of mining in the sea environment

The scientific progress of offshore research made in the last years, in addition to the fact that Brazil has one of the greatest and richest continental shelves of the world, has opened new frontiers for research and the mining of mineral resources in the country.

In this regard, the mining industry, boosted by pioneering technological advances obtained by the exploration of oil and natural gas in our country, mainly with the recent discoveries of pre-salt, is been increasingly attracted by the economic potential of mineral resources in the sea environment.

With the purpose of adjusting our mining laws to such industrial development, the National Department of Mineral Production (DNPM - Departamento Nacional de Produção Mineral) has made available for public consultation, until the last Septemer 28, a technical script aiming at regulating the research works in areas located in territorial sea, continental shelf and exclusive economic zone. The initial wording was prepared by a work group comprising government corporation employees and is, currently, under the assessment of the Executive Board of Inspection of Mining Activity (DIFIS - Diretoria de Fiscalização da Atividade Minerária).

Although the report represents a preliminary progress towards the regulation of the offshore mining exploration, it forces the need to discuss the other issues which prevent the development of the industry, such as the overcoming of potential conflicts between our national law and the provisions of the United Nations Convention on the Law of the Sea.

INSTITUTIONAL

Machado Meyer celebrates 40 years of social actions

In 2012, the office Machado, Meyer, Sendacz e Opice Advogados celebrates its 40 year anniversary. In order to celebrate this important date, it decided to organize a different celebration: instead of feasts, concerts or gala outfits, it has chosen to reinforce the set of sponsorships to culture and art, in various social actions, in order to throw a party which would benefit many people. Among the chosen shares there are the Ernani de Almeida Machado award and Estação da Juventude Machado Meyer.

Ernani de Almeida Machado award will gift interns of Santa Marcelina Cultura, a social organization in charge for the management of Escola de Música of the State of São Paulo, by means of a sponsorship to the musicians of the Young Orchestra of the State who had the best results in the contest. The winner will receive a prize worth R$ 60 thousand the highest one granted to a young orchestra, which must be used for the musical improvement in a school institution abroad. The other four rankings will receive R$ 15 thousand each, for scholarship or purchase of instruments.

In addition to the amount allocated to the contest, Machado Meyer also sponsored the purchase of class A percussion instruments for the group: metal plates, marimbas, symphonic tambourines, tom-tom drums, kettle drums, comprising a sophisticated kit, essential for the improvement of the sound of the orchestra.
The Estação da Juventude Machado Meyer was inaugurated in December, by the Municipal Secretariat of the Social Welfare of the City of São Paulo, in a partnership with Machado Meyer. The Centro de Convivência para Crianças, Adolescentes e Jovens – Jardim Imbé, located in one of the most peripheral regions of the city, Capão Redondo, is an exclusive complex for culture, sports and qualification of young people of São Paulo capital. It will provide socialeducational assistance to 6 to 17 year old children, teenagers and young people, focused on the constitution of a lounge and the strengthening of the family and community bonds.

The donation of one of the wards of the space, called Estação da Juventude Machado Meyer, included one language room, one CD recording studio, one workshop for DJs, one computer room and dance studio. 1,140 children, teenagers and young people assisted in the site will be benefitted by the partnership.

Raquel Novais, managing partner of the office, wants these initiatives to set the example to companies and other entities that may contribute with social projects. “This is a small gesture to show to private enterprise the world of possibilities around it”, she says.

TAX - Alexandre Weisz, Lorena Cavaliere and Camila Abi-Riham

Decrees extend benefit to consumption products in the State of Rio de Janeiro

On August 21st, 2012, the State Decree nr. 43.725 was published, covering the reduction of the calculation basis of ICMS and the application of the tax replacement in operations performed by a company falling under the Funding Program to the Wholesale Trade and Distribution Centers of the State of Rio de Janeiro (RIOLOG). Among the products listed in Sole Annex of such decree, there are cleaning products and personal grooming products and food.

This measure reinforces the purpose of the Government of the State of Rio de Janeiro to stimulate the installation of distribution centers of companies of the wholesale industry in the State. RIOLOG exists since 2003 (instituted by Law nr. 4.173, of 2003), and established a tax rebate of 2% of ICMS in the placement of such goods in these centers. One year later, Decree Nr. 36.453 determined the reduction of the tax calculation basis to 13% and the charge by means of tax replacement.

The following are the main issues brought up by the new Decree: i) the reduction of calculation basis of ICMS in internal exits, so the tax burden results in 13%, being 1% allocated to FECP, in operations with goods not listed in annex of Decree; ii) in operations with goods listed in Sole Annex, the tax rate is of 12%, being 1% allocated to FECP; iii) deferral of ICMS in operations of import of goods for the exit time, directly made by the company or on account and order of third parties; and, also iv) the company falls under RIOLOG, operating the goods listed in Annex elected as taxpayer replaced in internal exit operations for the purpose of retail.

Furthermore, on August 30th, 2012, the State Decree nr. 4,739 was published, which instituted the special tax treatment for the production of ethanol and sugar in the State of Rio de Janeiro.

The decree reduces the tax rate of ICMS levied upon the exit operations amount from 24 to 2%, by means of transference or sale of ethanol and sugar, already including the additional percentage of 1% allocated to the Fund of Eradication of and Fight Against Poverty (FECP), however no tax credit must be used.

Also, such decree authorizes the deferral of due ICMS: i) for the time of exit of the finished product in internal purchase and import operations of inputs allocated to industrial process; and ii) for the time of exit of the goods in operations of entry of the machine, equipment, piece, part and accessory, for the purpose of forming the fixed asset of the institution falling under the special tax treatment.

The Decree also sets forth the obligations which must be followed by the taxpayer for the use and maintenance of the benefit, as various investments in industrial units, the need for issuance of Electronic Invoice (NF - Nota Fiscal Eletrônica) and to have a Digital Fiscal Bookkeeping (EFD).