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Challenge

In the late 1990s, the S?o Paulo Metropolitan Region (SPMR) faced severe challenges related to uncontrolled urban sprawl, the associated traffic congestion, and increased travel times and distances. Increased motorization had resulted in negative externalities including pollution, accidents, and long commuting times; the public transport sector¡¯s lack of integration was a primary constraint, especially for poor residents at the peripheries of the metropolitan area, for whom the average daily commuting time was 2.5 hours. About 37 percent of daily commuting trips were by car, with only 30.8 percent by public transport. Buses were the main public transport mode used: They accounted for 75 percent of all public transport trips. Vehicles contributed to 31 percent of particulate matter emissions. In 2006, about 150,000 road accidents occurred in the SPMR, with costs conservatively estimated at US$1.5 million per day. 

Approach

S?o Paulo Metro Line 4 was designed to carry one million passengers per day. It was Brazil¡¯s first passenger transport public-private partnership (PPP), with operation and maintenance under a 30-year private company concession. The PPP was designed with an innovative risk demand sharing structure. The private sector bears all risks when ridership remains within a target range. Below the lower limit, a public payment obligation is generated; above the higher limit, public and private partners share the gains. Another innovation was to segment construction into two phases, both supported by the World Bank. The first phase included stations with large ridership; the five remaining stations, plus a four-kilometer extension, were left for the second phase. Phased construction required an innovative implementation strategy to deal with construction on the already fully operating system. Project continuity was reinforced by a project management oversight consultant that remained throughout the project.

Results

Line 4 has substantially improved the quality of service provided to urban transport users in the area of influence served by the project¡¯s Phase 2. 

• Since 2002, peak hour travel time has been reduced by 50 percent to 32 minutes in 2018. 

• Reduced travel times have contributed to increased demand and level of service. Line 4 transports daily close to 750,000 passengers. It is expected to reach close to 1 million in 2020. 

• The line offers the latest technology, comfort, and safety. Line 4 is the first driverless heavy-capacity metro in South America. It incorporates the latest train operation technology (Communications-Based Train Control), including platform screen doors that open when the train arrives, improving safety, speed, and regularity in boarding times, and information systems informing passengers about train capacity. The entire line allows cellular reception.

• All stations are physically integrated with buses near stations or by direct connection to a bus terminal (Four new bus terminals were built, financed by the project.). According to the latest user satisfaction survey, integration with other metro lines and buses is considered ¡°very good¡± by 80 percent of users. Tariff integration (Bilhete Unico) was put in place in 2006, during the first phase of the project, and allows free transfers between all rail-based modes and bus systems using contactless fare cards. 

• Accessibility to jobs and urban amenities has increased, especially for low- and middle-income areas near Vila S?nia. Residents in these areas can now access, within a 60-minute trip, more than twice the number of employment positions than they could before the project. 

Bank Group Contribution

ľ¹ÏÓ°Ôº, through the International Bank for Reconstruction and Development (IBRD), provided $340 million to the S?o Paulo Metro Line - Phase 2. The Bank¡¯s contribution, split into two loans, constitutes 54 percent of Phase 2 costs. The Bank¡¯s first loan ¡ª S?o Paulo Metro Line 4 (Phase 2) ¡ª provided US$130 million, 22 percent of the overall estimated final cost of the project. The remaining US$210 million is financed by the S?o Paulo Metro Line 5 Project, which had achieved savings and was therefore extended and restructured to include the final civil works of Line 4. 

Partners

External financing for the public civil works of the S?o Paulo Metro Line 4 (Phase 2) was co-financed by the Japan Bank for International Cooperation (JBIC) and the Bank. Each financed close to 22 percent of the initial total costs (US$130 million), while counterpart funding was expected to be 57 percent. The Bank provided implementation support on behalf of JBIC. In December 2015, the borrower requested use of US$210 million in savings obtained under the S?o Paulo Metro Line 5 Project to address the financing needs of Line 4, thus reducing direct counterpart funding in a tight fiscal situation for the State of S?o Paulo. 

Similar to Phase 1, Phase 2 relied on the private concessionaire ViaQuatro for the acquisition of new trains and the operation and maintenance (O&M) of the newly constructed stations. The 30-year concession contract includes operation of the Metro Line 4 as well as investment and installation of rolling stock, signs, track connections, and data transmission in the train networks. This PPP agreement was signed during Phase 1 (2006) and continued to work successfully during Phase 2, providing a great example of the benefits of using the Maximizing Finance for Development framework in the context of large transport infrastructure investments. ViaQuatro supplied 14 trains in Phase 1 and 15 additional trains during Phase 2. Concessionaire ViaQuatro used an estimated US$450 million of private financing for O&M on Line 4 between 2010 and 2018. 

Beneficiaries

Passenger Andressa Gomes Santos lives in Parais¨®polis, in S?o Paulo¡¯s south zone. She commutes using Line 4. ¡°The headway between trains is very short, and I save 60 minutes in my daily commute, besides the $2 dollars a day given that I don¡¯t need to get the bus to reach the Metro.¡±

Giane Maria Freitas da Silva lives in Cotia, a western area of S?o Paulo and uses Line 4 both for commuting and over the weekends for leisure traveling, integrating with Line 2. ¡°I am saving between 20 and 30 minutes every day, and I am very pleased with the comfort it provides.¡±

Wanderson Adelino Dias Fernandes lives in the Parais¨®polis, in the south zone of S?o Paulo, and commutes to work using Line 4. ¡°I am surprised with so much technology like the  platform doors to increase safety for the users. The trains are so  much faster than the buses, and I save between 40 to 60 minutes in my daily commute.¡±

Moving Forward 

Although significant gains in rider benefits have already been achieved, Line 4 is not yet complete. One station and its access tunnel are still under construction and, with financing under a Bank loan, are due to be completed by 2020. Travel time gains between Vila S?nia and Luz are then expected to be even greater: The two ends of the line will be reachable within 20 minutes. The Bank¡¯s continued support ensures the financial and technical sustainability of the project, as does the commitment of the State of S?o Paulo to improving the quality of urban mobility for its residents. Promoting urban sustainable mobility has been one of the main pillars of the SPMR¡¯s 16-year Strategic Master Plan, developed in 2014, which included ambitious actions such as the introduction of parking minimums, promotion of a biking culture, and strong investments in mass transit.