ANo. L-169-

RESTRICTED

This report is restricted to use within the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TECHNICAL REPORT ON

A PRIORITY REHABILlTATION PROIECT

OF THE

CENTRAL DO BRAZIL RAILWAY

June 20, 1952

TBoan Department

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BRA Z IL

TECHNICAL REPORTON A

PRIORITY REHABILITATION PROJECTOF TIM

CENTRAL DO BRAZIL RAILWiAY

Purpose and Scope of the Report

This report is based on an investigation and report by the JointBrazil-United States Economic Development Commission on a priority projectof rehabilitation of the broad gauge section of the Central do BrazilRailway. The Bank had retained the services of lHTr. C.E. Smith, a railwayconsultant, to 7Tork wJith the Commissicn in supplying additionaltechnical assistance and in expediting the project studies. A member ofthe Bankts Engineering Staff investigated the main features of the projectin the field during the trip of the Bank delegates in early June, 1952.

The findings of the Commission and of the Bank engineers relatingto engineering, operation and financing are summarized in this report.

Description of the Project*

The program of the most urgently required rehabilitation asrecommended by the Joint Con¢nission covers five projects designed toimprove the traffic capacity and the operating efficiency of the railway.These five projects are as follows:

1. Project A. Lengthening of passing sidings between BeloHorizonte and Lafayette, expansion of yards at

Lafayette, with a total track increase of 23,200 meters andinstallation of 50 turnout apparatuses.

2. Project B. Rehabilitation of main tracks between Rio de Janeiro,SaO Paulo and Belo Horizonte. This involves the

renewal of 369,000 ties; the re-spacing of existing ties and thelaying of 8911000 additional ties to provide for proper spacingbetween the ties; the renewal of 640 Ima of worn and old rail; theballasting of 1,000 ka of track including materials and tools forthe perfonrance of the work over a period of five years.

3. Pro4ect C. Construction at Barra do Pirai of a diesel mainte-nance and repair shop for the servicing of all

diesel-electric locomotives operating on the broad gauge lines ofthe system.

*4. Project D. Construction of the Arara marshalling yard at Riode Janeiro with a capacity of 700 freight cars for

the handling of freight to and from the port of Rio de Janeiro,

* See Table I for general statistics

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5.- Project E. The acquisition of 2,265 new all steel or steelunderframe freight cars. Fifteen hundred of these

cars will replace 2,075 all wooden construction freight cars whichwill be scrapped. The balance of 765 new cars will take care ofincreased tralffic requirements.

The above mentioned projects are considered as urgent ones requiringprompt implementation. The Commission indicates in its report that re-storation of the Central do Brazil Railway to a satisfactory level ofeficient operation will require a notable expansion of the present programwhich w^rould include new rolling stock, electric multiple units for thesuburban traffic, re-alignment and re-conditioning of tracks, strengtheningof bridges and other projects. The Central Railway does not have aconsistent long-range plan of rehabilitation. At the request of the Banka list of future improvement projects is being prepared by the Central andwill be submitted to the Bank. In addition to these technical projects,it is apparent that the entire administration of the Railway needs re-organizing. The five projects presented by the Joint Cormnission are,however, fully conslstent with future plans of rehabilitation and areregarded as an urgent and indispensable basis for the improvement ofrailway operations.

Estimates of Costs

Estimates of costs of each of the five projects, prepared jointly bythe Transportation Sub-Commission and the Administration of the Railw.ys,are shown in Table II attached. The total cost of the five projects,exclusive of allowances for contingencies, escalation and spare parts, isestimated by th-e Comnmission at:

Imported MIaterials Local Costs of TotalMIaterials and Labor Equivalent to

,51 Cruzerios ' US$ Cruzerios000 000 000

10,780 1,074,000 63,700 1,292,000

Of the aggregate dollar cost of the projects, about $8.7 million,or 80 per cent, are earnariced for procurement of freight cars underProject E. Of this amount $3.6 million are allocated for the purrchaseabroad of parts not produced in Brazil which are required for themanufacture in Brazil of 1,630 cars. These parts include axles, air brakes,roller bearings and steel wheels for the gondola cars. The balance of$5.1 million will be used to purchase 635 hopper cars abroad which willbe knocked dotm for assemibly in Brazil. The dollar costs are based on bidsreceived in the latter part of 1951 from United States manufacturers andthe local currency cQsts are those estimated by the Transportation Sub-Commission.

* 1 US$ = Cr.$ 18.72The conversion rate used by the Commission is 1 US 3 Cr.$ 20.25and includes taxes.

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Three alternatives had been examined by the Commission for the supplyof freight cars. Under all three alternatives the refrigerator, stockand freight cars were to be entirely built in Brazil. The remaining carswhich include 700 box cars, 430 gondolas and 635 hopper cars, were to bemanufactured under the first alternative in the United States; under thesecond alternative these cars were to be manufactured in the United Statesand knocked down for assembly in Brazil; under the third alternative thecars were to be completely built in Brazil and only special parts were tobe imported from the United States. Although the Commission has made acomparison of prices on the basis of quotations of United States manu-facturers, the final procurement program will, of course, be based uponcompetitive international bidding.

It was found on the basis of submitted quotations that the cheapestsolution -wras to procure the cars completely finished in the United States.The Joint Commission has approved, however, the proposal of the Railwayunder which 635 heavy hopper cars will be ordered abroad, knocked dovn forassembly in Brazil, and the balance of the cars will be manufactured inBrazil using certain imported parts. The reasons for this decision arethe folloving:

a) The requirement for foreign currency will be less than wouldhave been needed to place the entire orders abroad;

b) The Brazilian Government is anxious to provide work fordomestic industries. The manufactuirers of freight cars haveat present very fevw orders on hand and are faced with thenecessity of dismissing workers.

c) The Commission feels that if larger sized orders are placed inBrazil, the manufacturers would be able to set up properproduction lines and reduce considerably the level of pricesquoted at present for the manufacture of cars. This in turnwould be an incentive for other railvrays of Brazil to placetheir orders with domestic firms.

For the other projects, a breakdown of costs has been submitted forthe diesel shop equipment and for the track maintenance and quarry equip-ment, The remaining expenditures in foreign currency are for switchmaterial, track fasteners, and miscellaneous items which are not speci-fically indicated and amount to less than 6 per cent of the total dollarcosts.

The estimates for foreign currency expenditures appear to bereasonably correct. They are based on manufacturers' bids for all majoritems and were valid in late 1951. In order to provide for changes inmarket prices, 10 per cent has been added to the estimates for escalation.In addition, about 10 per cent has been allowed for spare parts for thetrack and maintenance equipment and about 5 per cent for spare axles,brakes,. roller bearings, and steel wheels. Three per cent has been addedfor unspecified items and changes in the final specification of the equip-ment. Total foreign currency expenditures are thus estimated as follows:

Imported materials (The Cormmission'sEstimate) $ 10,780,000

Escalation (10 per cent) 1,078,000Spare parts 300,000Unspecified (3 per cent) 342,000

Total $ 12,500,000

The local currency costs of the project have been estimated by theRailway and the estimates cbecked by the Joint Comnission on the basis ofthe present-day prices for construction in Brazil. The cost estimates oflocal expenditures have been increased by 10 per cent to take care ofcontingencies.

The total cost of the project in foreign and local currencies isnovw estimated at:

Imported materials $ 12.5 millionLocal costs of materials and Cr4 1,181 million (equivalentlabor to $58.5 million)

Schedules of Fxpenditures

It has been assumed in the report that foreign deliveries would becompleted over a period of two y-ars and that the manufacture of the freightcars in Brazil could be started immlediately upon approval of the project-orith deliveries beginning four nonths after receipt of the importedmaterials. It has been estimated that the dollar expenditures would amountto roughly 50 per cent in each of the first two years and that the heaviestexpenditures in cruzeiros would be required during the first tVfo years.

All expenditures in foreign and in local currencies with the excep-tion of the track rehabilitation project, are scheduled to be completedby the end of the second year. The completion of the track rehabilitationproject will require five years. (For details see Table !II)

The yearly expenditures are predicated as followris:

Estimated Schedule of Expenditures

Dollars Cruzeiros(millions)

1st Year 6.25 4002nd Year 6.25 4113rd Year - 1534th Year - 1535th Year - 6

Total 12.5 1,181

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Justification of the Projects

1. Project A

Sidings are to be lengthened at eleven stations betiween BeloHorizonte and Lafayette. This section of the track carries a dense oretraffic for the steel mills located at Volta iTotonde and in the valley ofParaiba and Sao Paulo as well as for export. The inadequate length of thesidings limits the size of freight trains to maximum eighteen hopper carswith one sraall locomotive. The resulting excessive number of small trainsrequired to move the freight entails longer runnirg time, delays in move-ment of cars and over-all limitations in the traffic capacity. New heavydiesel locomotives have been ordered by the railways. After extension ofthe sidings, trains of forty-four freight cars of ore or seventy-five ofgeneral freight could be handled. This would reduce from sixteen to sixthe average daily number of freight trains on this line, based on thepresent traffic, and would allow for large traffic expansion.

The expansion of the yard at Lafayette is an integral part of theproject in order to permit the proper weighing of the freight and thedispatching of the trains.

The Commission estimates that the project will result in increasedrevenues, firstly, by recapturing freight now being moved by truck becauseof the inadequacy of rail service and, secondly, by permitting an over-allincrease in traffic of at least 300 per cent over the present level. Onthe operational side, it has been estimated that for the sane freighttonnage as handled in 1950, the locomotive-kilometers could be reducedunder the project from 1*46 million km to 0.58 million km resulting in asaving on fuel and maintenance of 75 million cruzeiros per year.

While it must be recognized that a large part of these savings shouldbe ascribed to the Qperation of diesel locomotives, the lengthening ofsidings and the improvement of Lafayette yard are technically necessaryfor the efficient operation of this section of the line. The project isthus fully justified both from the technical and financial points of view.

2. Project B

Worn-out ties are to be replaced and additional ties laid inorder to increase the number per length of rail from sixteen to twent-y-twoties, involving the purchase of 1,280,000 million ties at the unit cost ofCr.$ 90 per tie; approxinately 640 kam of track of worn-out 85 pound and100 pound rails to be relaid with 115 pound rails at an estrimated cost ofCr.$ 318 million; about 1,000 Ian of track to be reballasted. with properlyscreened stone at an estimated cost of Cr.$ 200 million. Foreign currencyis needed to purchase abroad the roadray maintenance equ,ip-ment and the stone quarry equipment totaling P'1.041 million and about $0.5million worth of switch material and track fasteners for the permanent way.The project is to be completed over a period of five years.

The backlog of old ties which require renewal is expected to becompleted in the first two years; from then on the cost of yearly renewals

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at the rate of 75,000 ties per year until completion of the project will becarried as part of the ordinary maintenance budget and is not included inthis project. Likewise, the rail renewal program is to be completed infour years and the expenses in the fifth year are only those required tocomplete the ballasting of the track.

From a technical point of view the above program is considered to beof urgent necessity, The present condition of the track is very bad andinadequate to handle the heavy traffic of raw materials. The track mustbe reinforced by means of additional ties and proper ballasting, and wornout and bent rails must be replaced. It is also necessary, in view of theheavier trains which are to be operated, to use a rail of 115 pounds on allthe Drincipal sections of the line. The project provides for the purchaseof track maintenance equipment, as a result of which the work will beperformed faster and better than by hand. After completion of the emergencyprogram the equipment will remain available for normal maintenance work.

The Comm.,ssion estimates that as a result of these improvements,normal yearly track maintenance costs could be reduced by as much as 40 to50 per cent. In additions the faster turn-around of freight cars andhigher commercial speeds of trains will increase revenues by an estimated20 per cent equivalent to approximately Cr4$ 110 million per year based onthe revenue figures for 1950.

The equipment and the materials for the rehabilitation of the broadgauge line have been examined and found appropriate. The Project is con-siderced technically sound and regarded as necessary for the rehabilitationof the track.

3. Project C

A new shop for the repair and servicing of broad gauge diesel-electric locomotives will be constructed at Barra do Pirai. Repairs of thepresently operated fifty diesel-electric locomotives are no;x made in an oldsteam locomotive engine house adapted for the purpose. The floor of thisbulilding is of loose drift, the engine pits are not adequate and overheadcranes are not available. There is no drop table, nor sufficient headroomfor jacking the locomotives. The degree of cleanliness required for adiesel shop cannot be achieved under e,iisting conditions.

The new shop will have an appropriate number of tracks and thenecessary machine shop equipmert for repair and servicing of the presentbroad gauge locomotive stock plus the sixty new broad gauge diesel loco-motives novw on order. The need for adequate repair facilities for arailNway system largely dieselized stands to reason, Indeed, proper mainte-nance is one of the major objects of any rehabilitation program. Greatersecurity and safety of operation and higher availability of locomotivesalways warrants an appropriate investment in a repair shop. The amountallocated for the shop equipment appears to be adequate on the basis of theindicated maintenance schedules.

4, Project D

A new freight assembly, receiving, forwarding and classificationterminal yard will be constructed to handle the incoming and outgoing

freight traffic of the port of Rio de Janeiro. At present the terminalyarc-s servicing the port are the Maritima and the Arara yards, The newterminal is to be located at Arara on property novw belonging to the Govern-mzent. The projeot provides for a yard capacity of 700 freight cals w,ithfuture extention up to 1,000 cars. The foreign exchange component coversthe purchase of switching equipment.

Because of the volume of traffic, both yards are now completelycongested. The lMraritima Yard should be devoted entirely to the handling oftraffic for delivery in Rio and not for port traffic. The new yard atArara will handle the heavy port traffic which includes the minerals, oresand coal. The present small yard is so hemmed in that expansion is notpossible.

Apart from easing conditions at the port, the benefits of the projectare to reduce train service in picking up cars for the port and to giveprompt and efficient service. Because of the better handling of freightafter completion of the project, it is expected that some 1,000,000 tons offreight per year now- moving by highway will revert back to the railways.Technically, the project is well Justified to meet the incoming and out-bound freight movement at Rio de Janeiro.

5. Project B

A total of 2,265 new freight cars will be acquired by the Railwayof which 1,500 will serve to replace old all-wooden cars no longer service-able and the balance will be used to meet increased traffic requirements.The number of new cars to be nurchased under the project is given beloww itOh costs estimated by the Joint Commission exclusive of spare parts,escalation and contingencies.

Type of Car ITo. Dollar Cost Cruzeiro Cost$1,000 Cr.$l,000

Hopper 635 * 5,106 40,600Box 700 - 1,420 147,500Gondola 430 P* 1,134 89,200Stock 300 .8* 608 58,500Flat 150 ** 304 22,,100Refrigerator 50 ** l1J, 12,700

Total 8,673 370,600

The present total ownership is 5,019 freight cars of vhich therailways plan to scrap 2,075 wooden cars -v.hich wiill be replaced by 1,500all-steel and steel underframe cars. In addition, the railways vrillacquire 765 newT hopper cars and gondolas, which wsill bring the total owner-ship of freight cars to 5,209 cars. The hopper and gondola cars are

*> The hopper cars will be assembled in Brazili-* The manufacture of these cars in Brazil requires importation of

certain parts not produced in Brazil.

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intended to cover the present traffic deficits and to provide capacity forincreased transport of coal, ores, manganese, ballast, and other materials,The higher unit tonnage capacity of the new cars will in fact permit asubstantially greater amount of freight to be carried with a smaller numberof cars. Because of the considerably reduced maintenance costs of the newmodern cars, it has been estimated that savings in running repairs andgeneral repairs of freight cars will amount to some Cr4$ 8.6 million peryear. In addition, the accumulated demand for freight service willcertainly permit the operation of the cars at full or near full capacitywith a corresponding increase of gross revenue freight and increasedearnings per car. The probable increase in freight revenues resultingfrom the operation of the new cars is roughly estimated by the Commissionat Cr4 80 million per year. Costs of operation and of maintenance of765 additional cars is estimated at Cr.$ 24 million per year. The totalanticipated financial return on the project is thus approximately Cr.$ 64.6million or 12 per cent on the investment.

The number and types of freight cars under the present project havebeen studied and found adequate on the basis of the immediate demandsplaced upon the railways. The purchase of these cars is regarded asnecessary for the efficient operation of the railways.

Strengthening of Bridges

The Commission lists among the future projects of the Central, thestrengthenina or the renewial of a certain number of bridges. In theopinion of the Bank's technical staff, this project should be a part of thepresent rehabilitation program. Five bridges between Belo Horizonte andLafayette would require strengthening to allow passage of the heavy, fullyloaded hopper cars provided under the present program. In view of possiblechanges in the alignment of the track in connection with hydroelectricdevelopment projects, it is considered that the strengthening of thosebridges would be sufficient at present and that they do not necessarilyhave to be replaced. The Railway has retained a firm of engineers toexamine the condition of the bridges and to submit a proposal for theirrehabilitation. While the report of these engineers will not be availablefor another twro or three months, it is roughly estimated that the total costfor strengthening of five bridges will not exceed Cr.4 3 million and willnot involve any expenditure in foreign currency.

Financial Position of the Railway

The Central Railway was administered as a government department until1941, and was subsequently placed under an tlAdministracao Autarquia". Inaccordance with the Law of July 22, 1950, the Government assumed responsi-bility for financing expansion and improvement projects of the Railway tothe extent that net earnings from railway operations viere not available forthe purpose. In 1945, two taxes on tariffs of ten per cent each wereauthorized for a period of 20 years to finance renewals and improvements.

From the records made available by the Railway, it was not possible toascertain the financial position of the Railway but it is 1known that thisposition is indeed very bad. In recent years the Railway has been operated

with very large deficits. Its debt position is even more obscure but itis certain that there is substantial debt, both short and long term, andthat the Railway is not in a position to meet its obligations withoutGovernment assistance,

In December 1951, the Ministry of Finance was authorized to assumeon behalf of the Government a substantial part of the floating debt torelieve the Railway from the responsibility for the settling of claims toprivate creditors accumulated over several years. The effects of thesemeasures should be reflected in the balance sheet for 1952.

Operating and Planning De2iciencies

The project which is here described will provide for track rehabili-tation, for better service and maintenance and for the renewal of a part ofthe rolling stock, Efficient operation of the railway, hovwever, can onlybe achieved by a large contribution of managerial and operative skill. Theprincipal shortcomings of the system at present are the lack of good organi-zation and management. There is no consistent policy or planning in theCentral. The position of Director-General is a political appointment andis usually of short duration. The top administration has no incentive toimprove operations or to balance the budget since the deficit at the end ofthe year is covered out of the Government budget.

Th.e key men in responsible positions hold them on a temporary assign-ment basis and are subject to displacement every time that a new Director-General is appointed. The supervisory personnel is at a loss to fulfil itsfunctions because of lack of direction and because of the uncertainty ofreceiving the materials and equipment which should normally be made availableto them. The total number of men on the payroll is grossly in excess ofrequirements but is maintained as a matter of Government policy. Theresults are visible in the poor quality of the work performed and in thespirit of frustration among the personnel throughout the organization.

Under similar conditions of traffic and operation, the privately ownedPaulista Iiailway presents an entirely different picture of organization tobe attributed to an aggressive policy of its management supported by anenergetic and well trained personnel.

A new law is now pending in Congress for the reorganization ofgovernment-owvned railways. Under this law, the individual railways wouldbe managed by a Board of Directors appointed by the Government who wouldelect a chairman to be the operative head of the railway. if passed byCongress, this plan would provide for a certain continuity in managerialpolicies and permit the adoption of badly needed reforms in the organization.

The Central Railway does not have a long-range program of rehabilitation.This results in the railway starting a proJect and then abandoning it andstarting a new project again. The railway has been requested to preparea broad statement shoving such future projects as can now be ascertained andsome indication as to the total costs and time required for their completion..This would involve track rehabilitation including purchase of sleepers andrails, additional new sidings, new passenger stock, a re-alignment of certainlines, nevw shop facilities and others.

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Recommendations

On the basis of recomimendations made by the Joint Brazilian-UnitedStates Econcmic Commission and of the findings of the Bankts consuLtant andL,vestigations in the field by the Bank's engineer, it is recormmended:

1) That the Bank consider favorably the financing of the foreigncurrenc-,r cost of the priority rehabilitation project of theCentral do Brazil in the amount of .i12.5 million.

2) That the Bank be satisfied that concurrently vith this projectthe railways dIll proceed with the strengthening of bridgesbetween Belo Horizonte and Lafayette in order to permit theoperation of heavy fre.ght cars.

3) That, if the Railway decides to postpone the strengthening ofthe bridges, the specifications of the hopper cars be changedfrom 90 to 80 tons of freight capacity.

4) That the Bank be satisfied that the Brazilian Government villmake avrailable the necessary cruzeiro financing of Cr.$ 1,181million, and that proper disbursement procedures would be setup for oruzeiro payments.

5) That the Bank be assured that the Brazilian Government willinstitute a program of managerial and acIministrative reformof the Central satisfactory to the Bank.

A. LI. SaitzoffEngineer

June 20, 1952

TABLE I

CENTRAL DO BRAZILGENERAL STATISTMS

POPULATION OF THE AREA SERVE,D BY THE CENTRAL DO BRAZIL

Regions served by Population of the states % of totalthe Central served by the Central do population

do BraZil BraZil, in 1950 (in 000)

Sao Paulo 9,243 17.56'Tinas Gerais 7,8410 14.90Rio de Janeiro 2,326 4.42Distrito Federal 2,413 4.58

Total 21,622 41b46%Other Regions 30,811 58.54

All Brazil 2,6 33 100.0%

TOTAL ROUTE LENGTH

% of TotalBroad Gauge (1.6 m) Narrow Gauge Total Route Length

of Brazil

1,362 km.(179 Im. are electrified) 2,122 km. 3,484 km. 10.17%

FREIGHT TRAFNSPORT IN 1950 (SELECTED FREIGHT)

Tons Revenues(1,000) (Cr.pl,O0O)

1. Iron and Manganese ores andIron and Steel Semi-manufactured 1,117 112,932

2, Fuels 774 55,o693. Building Materials 526 44,8024, Foodstuffs 731 104,1505. Other Ravwi aterials 402 49,5976, Mdanufactured Goods 71 16,4877. iMiscellaneous Items 859 542,844

Total 4,480 925,881

DECLINE IN REVEiNU'E PER TON/KMo.

Year Average Revenue Ton/km.

196 Cr. , 0.421947 0,371948 0.351949 0.341950 0.40

TABLE I (continued)

INVEN TORY OF BROAD GAUGE ROLLING STOCK

Freight Passenger Passenger Suburban Others TotalA______ _________ and Freight

A) LC'M T*OUIs7

a) Suitable for regularoperation

Steam 134 102 45 16 _ 297Diesel-electric - - 55 - 55Straight-electric - 21 21

Iotal 134 102 121 36 - 373

b) To be scrapped assoon as possible(steam pov-.er)

Over 30 years old - 41 72 - 97 310Over 20 years old - 14 18 - 5 37Over 10 years old _ - 2 4 6

Total - 55 92 - 206 353

Grand Total 134 157 213 16 206 726

B) FREI_C-I CA^RS All Steel Steel Underframe All Y1ood Total

pe

Box 1,098 104 814 2o016Stock - - 324 324Refrigerator 104 34 138Gondola 527 222 538 1,287Flat 2 246 132 380Others 44o 201 233 874

Total 2,o67 877 2,075 5,019

C. PASSEINTGER CARS 78 117 328 523

TABLE II

EXPENDITURE'S FOR THE CENTRAL DO BRAZIL REHABILITATION PROJECTS

Imported National Materials Total ExpendituresMaterials* and labor Equivalent to Equivalent to

US$ __ C_; _ __ .___US_ Crt

Project:

A. Sidings 62,294 18,092,841 960,000 19,354,294B. Track Rehabilitation 1,531,357 652,278,000 34,OOO0,o0 683,287,979C. Diesel-electric Shop 427,700 20,000,000 1,420,000 28,660,925

D. hrara Yard 90,000 13,229,300 750,000 15,051,800E. Freigl%Cars ** (635 hopper cars) 5,106,035 40,640,000)

(1630 various cars) 3567 2I5 29*930.874) - 27,000,000 7546,245,294

Sub-Total 10,781,631 1,074,171,015 64,300,000 1,292,600,292

Escalation (10%) 1,078,000 1,078,000 20,300,000Spare Parts 300,000 300,000 6,100,000Unspecified (3%) 342,000 342,000 7,000,000Contingencies (10,) _ OL4 07 10000 _5_3 0 .Q9 107o400,000 _

TOTAL (rounded figures)*** 12,500,000 1,181,000,000 71,300,000 1,433,000,000

* Ocean freight included.

** The dollar expenditures cover the purchase in the United States of 635 hopper cars knocked down for assemblyin Brazil and the purchase of special parts for 1630 cars of varying descriptions which will be manufacturedin Brazil. These parts are axles, air brakes,, roller bearings and steel wheels for heavy gondola cars. Theexpenditures in cruzeiros are indicated separately for the assembly of the hopper cars and for the manufac-ture of the remaining cars.

*** The estimater given above are those developed by the Joint Commission except for allowances for contingencies,spare parts, escalation and for unspecified items which have been computed by the Engineering Staff.

TABI:i IIIESTIMATED OCRBDUJJE OF CRUZEIRO EXPENDITURES*

1st Year 2nd Year 3rd Year 4th Year 5th Year Total

A. Sidings / 12,061,894 6,030,947 - 18,092,841

B. Track Rehabilitation J 157,567,000 157,567,000 139,654,000 139,654,000 57,836,ooo 652,278,000

C. Diesel-electric Shop :3 15,000,000 5,000,000 - 20,000,000

D. Arara Yard 4/ 13,229,300 - 13,229,300

E. Freight Cars 5] 164,965,437 164,965,432) 6/ - 370,570,87440,640,000)

362,823,631 374,203,384 139,654,000 139,654,000 57,836,0oo 1,074,171,015

* The estimates are those developed. by the Joint Comrnission. A provision of 10,% for contingencies hasbeen added by the Engineering Staff to the total estimated expenditure and is shown in the estimatesgiven in the re-nort.

1/ Completion of the proJect estimated to require 1 1/2 years.2,( Completion of the weork in five years. It is assumed that in addition to the project investment of

Cr$6.52.3 million, the Central will spend Cr$23 million from its regular budget.3i It is assumed that 3/4 of the expenditure will be made in the first year,.4±/ Completion estimated to require one year.5] The Management of the Central do Brasil estimates that manufacture of the 1630 freight cars to be pro-

duced in Brazil could be started immediately upon approval of the project, deliveries being initiatedfour months after the receipt of the imported materials (axles, brakes and bearings). It is expectedthat half of the total payments (which will include advance payments) will be made in the first year andthe remainder in the second year.

i./ Thi s expenditure of 40.6 million cruzeiros represents the estimated cost of local materials and laborfor assembly of 635 hopner cars, which will be imported knocked down for assembly in Brazilian shops.

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