Brazil's Bullet Train

Brazil's on-again, off-again bullet train project connecting Rio de Janeiro and Sao Paulo is back on again. A rail project you ask? Ten years into the 21st century?

Yes, it's a backwards, outdated project proposing expensive passenger rail transportation at a time when air transportation is not only faster, but cheaper and more efficient. Yes, it is more of a political move rather than an infrastructure necessity. Yes, thousands of innocent families will be booted out of their homes and paid 10 centavos on the dollar (Real) in the government's eventual appropriations. Yes, Brazilian taxpayers will be footing a large chunk of the bill with no clear benefit for them. Yes, small townships located on the proposed Rio-Sao Paulo line are already fighting to have the trains stop in their municipalities, taking the speed out of the bullet.

Here are some "bullet" points:

• Government estimated costs of US$ 18.7 billion (triple that to get true estimation)
• The company offering the lowest fare will win the bid for the 317 mile train
• The winning (wink, wink) consortium will be announced on December 16th, 2010
• President Lula expects the project to be delivered in 2016, just in time for the 2014 World Cup
• Average train speed of 177mph
• 82 miles of trajectory through tunnels
• Trains leaving every 15 minutes
• Passengers per train - 855
• Estimated time from city to city - 85 minutes
• Projected ticket price R$ 200 each way (US$ 115)

Wednesday bullets

Wednesday was a national holiday (Tiradentes - Tooth Puller Day) in Brazil, but there is plenty of action happening anyway.

• The capital city of Brasilia turned 50 years old today. The Washington Post has an article describing the city's challenges. "As Brasilia turned 50 years old on Wednesday, vestiges of that dream live on in Oscar Niemeyer's soaring architecture, the uniform residential apartment blocks, and the plane-like city shape that legend has it was meant to signal the Latin American giant's take-off." Meanwhile, Hooters Brasilia celebrated by granting customers two free beers with the purchase of the Hooters Rib plate.

• Big international law firms (Millbank Tweed Hadley & McCloy LLP) and investment banks (Standard Chartered PLC) are opening offices in Sao Paulo. And we wonder why real estate prices are skyrocketing.

• Wizard, a language school franchise with 1200 locations throughout Brazil, has plans to open 10 schools in the state of Pernambuco by 2012. 

 Students loiter outside recently inaugurated Wizard

• Construction material sales grew 26% in March. Brazilian real estate experienced a hiccup in 2009, but it is roaring in 2010, due to lower interest rates, increased consumer confidence, and the governmental Minha Casa, Minha Vida (My House, My Life) program, which plans to spend R$34 billion of newly printed and taxpayer money to help build one million houses for those making less than R$60,000 a year.

Wednesday bullets

• Folha Online reports on new taxi fares from the International Airport. "Besides overcrowded terminals, long check-in lines, even lines to go to the bathroom or to buy a coffee, the users of Sao Paulo's international airport in Guarulhos have another reason to complain. Taxi fares from the airport became about 19% more expensive to most business destinations in the city. This means that a previous R$88 (US$49.50) taxi ride to Paulista Avenue now will cost R$ 105 (US$59) and a trip to Brooklin (south zone) will now run R$127 (US$72)." 

• Bloomberg writes that Morgan Stanley has opened a hedge fund office in Sao Paulo that will serve clients in South America. 

• So did Lenovo buy one of Brazil's largest PC manufacturers? A news source from China seems to indicate that it did. Positivo, the acquisition target in question, denies it.

Hyatt - economic version

After nine years with only one hotel in Brazil -- a five star hotel in Sao Paulo --, the Hyatt Hotel group will start expanding in the country. It plans to invest R$300 million (US$169 million) to open 15 hotels by 2015. Hyatt Place, geared towards the executive market, will have daily rates of approximately R$200 (US$ 113), about one third of the price its current hotel charges.

Grand Hyatt in Sao Paulo: 15 new hotels by 2015

*Article from Exame magazine, April 7th, 2010 print edition

Tuesday bullets

• Flash flooding in the city of Rio de Janeiro has spurred chaos and is responsible for approximately 100 deaths (as of 7:30 p.m. Brasilia time). BBC posted some pictures on their website of what life was like for "cariocas" (residents of Rio) today after receiving 11 inches of rain in 24 hours.

• Meanwhile, bad news for some is good news for others. Businessweek reports that the rain is welcome news for the world's largest producer of coffee, sugar and orange juice, and may boost yields.

• The US and Brazil appear to be slowly resolving their trade dispute over cotton subsidies offered by the US government. Brazil won a case at the World Trade Organization (WTO) and has the right to impose sanctions on US companies. In the end, this sort of action (tariff increase) doesn't help anyone. It just makes products and services more expensive for Brazilian residents.

• Where's the beef? Reuters reports that the world's largest beef processing company, Sao Paulo-based JBS, is looking to raise over one billion dollars in a stock offering. "JBS, which started as a small abattoir in Brazil's Midwest, has ballooned in size in recent years through a series of acquisitions in the United States, Europe and Asia to become the world's biggest beef exporter, the No. 2 global poultry company and the No. 3 U.S. pork processor. The company plans to use two-thirds of the proceeds from the stock offering to expand its direct sales business, including acquisitions of distribution centers and delivery trucks. The remaining funds will be set aside for working capital."

• Kevin Grewal at Minyanville gives his argument of why Brazil is a hot market. Nothing we haven't heard before -- the country is rich in natural resources, it will be hosting international events (World Cup 2014, Olympics 2016), and it has low interest rates. Wait. What? Low interest rates? That point is certainly debatable. Brazilian interest rates have declined, but they are still high compared to most economies.

• Exame has a great article (in Portuguese) on the future of the proposed bullet train linking Sao Paulo and Rio de Janeiro, allowing passengers to get from city to city in a blazing 90 minutes. It has an estimated cost of R$ 34.6 billion (US$ 19.8 billion), but we all know how projects increase in price, scope and corruption.

Friday bullets

• Exame published a fascinating inside look at how Brazilian executives are reshaping Anheuser-Busch, maker of America's most famous beer -- Budweiser. Apparently, InBev has been rather vicious in its cost-cutting maneuvers since purchasing the the company for 52 billion dollars last year. It will be interesting to see if the Dutch-Brazilian conglomerate can make AB a success, in the face of having to fire 1400 people - including 14 of its 17 top executives, delaying payment to suppliers from 30 to 120 days, and generally making other tough business decisions, while certainly pissing off a lot of people.

• Exame also has an article (in Portuguese) about the hot Brazilian real estate sector. Many people are buying simply for investment purposes. "In the 463 square foot apartments of the Affinity, a building in the Sao Paulo neighborhood of Vila Olimpia, the only bed that fits is a double bed and the kitchen is located in the same environment as the living room and bedroom. Still, almost all the units have been sold, each one for R$ 300,000. (US$ 170,000)."

• Construction and manufacturing will most likely drive Brazilian employment in 2010, amid the promise of generating 2 million new jobs and growing GDP by 5.8%, according to this analysis by Michele Loureiro at Brasil Econômico.

•  Despite its problems in the US, GM announced it will invest R$ 1.4 billion (US$ 778 million) to modernize and expand two plants in the state of Sao Paulo.