Sao Paulo

Sao Paulo: Keeping transportation megaprojects on the rails 

Anyone who has experienced Sao Paulo traffic at rush hour is painfully aware of the city’s need for new transportation options. Each year, the city is estimated to lose approximately USD9 billion as a result of congestion, road accidents and lost productivity. It is not uncommon for citizens to be stuck in traffic for hours at a time.

Citizens of Sao Paulo are also quick to point out that the city has already made significant strides to improve urban transportation over the past decade. The city currently boasts some 380 kilometers of urban transportation networks including metros, suburban light rail and bus corridors. As a result, ridership has doubled over the past decade to around 55 percent of the city’s population and that number is expected to increase to 65 percent as new lines are developed and opened. It is this type of transformative impact that won Sao Paulo recognition in the most recent edition of Infrastructure 100 for their soon to- be-completed metro’s line 4.

Today, Sao Paulo is rolling out what is likely the largest urban transportation project in the western hemisphere. The city currently has four separate metro projects underway which will deliver an additional 56 kilometers (km) to the network, and plans are in place for three new lines to augment the metro network and two new suburban rail lines to connect Sao Paulo to other major centers in the region. “It’s a big challenge delivering all of these projects at the same time,” noted Jurandir Fernandes, the Secretary of State for Metropolitan Transportation in Sao Paulo.

Facing down the mega challenges of megaprojects

Secretary Fernandes identifies three main challenges that face almost every major transportation project of this size and scope. The first is financing. In total, Sao Paulo plans to invest around USD22 billion across its portfolio of transportation initiatives, all within a very short timeframe. “We have had to look at securing a mixture of different financing options to raise the capital required to complete all of the different initiatives simultaneously,” noted Secretary Fernandes. “Ultimately, around half of the financing requirements will come from multilateral financiers such as the World Bank and the IDB, while the other half will be made up of direct government investment and – where it is viable – Public Private Partnership (PPP) arrangements.”

Securing the capability and capacity to execute the various projects has also created challenges for the city. With massive amounts of infrastructure development now underway in advance of Brazil’s hosting of the FIFA World Cup in 2014 and the Summer Olympics in 2016, much of the country’s internal capacity for infrastructure delivery is now sorely stretched. “We are experiencing a significant shortfall in the number of engineers and project designers with the right mix of skills to meet this level of demand,” he noted. “As a result, we’ve had to augment our national capacity with expert advisors and professionals from other countries.”

The third challenge is one of integration and planning. To maximize the efficiency and effectiveness of the network, new lines must be well-integrated into the existing transportation systems. “Over the past 4 decades, we have carefully studied traffic patterns across the city to help us to create a network that not only interoperates seamlessly, but also meets the current and future needs of our population,” Secretary Fernandes added.

Creating the right environment for success

The Secretary also noted that Sao Paulo’s success has been largely facilitated by Brazil’s growing reputation as a safe and reliable market for infrastructure investment. At the policy level, the state government has taken great pains to create a well-defined and carefully planned long-term strategy for transportation which creates stability and reduces uncertainty. The government has also demonstrated strong respect for long-term contracts with the private sector. With more than 30 years of experience creating, awarding and maintaining concessions in the country, many foreign investors have already found that Brazil is largely committed to upholding long-term private contracts.

“We believe that Brazil – and Sao Paulo in particular – offers foreign investors a great opportunity to participate in strong and expanding urban transportation projects within a developing world context,” added Secretary Fernandes. “By combining a strong track record for political stability with a proven commitment to contracts and a well articulated long-term transportation plan, Sao Paulo stands out as a market that offers rich investment opportunities with minimum risk.”

Secretary Fernandes is keenly aware of the transformative impact this megaproject will have on the citizens of Sao Paulo. “Once completed, we’ll have created a system that helps us reduce pollution, increase productivity and enhance the quality of life for our citizens,” he added. “But while I’m very proud to be helping to transform our city, I also recognize that megaprojects of this size and scope are a massive responsibility that we can’t afford to get wrong.”

By Mauricio Endo, KPMG in Brazil

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INSIGHT: Megaprojects

INSIGHT: Megaprojects
We sat down with some industry leaders in the sector - developers, project owners, to create an informative & practical view on megaproject delivery.

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