By Brazil Stock Guide – Brazil’s federal audit court is weighing a landmark case that could redefine the government’s railway concession policy. According to a report from Agência iNFRA, the Tribunal de Contas da União (TCU) received a technical opinion from its fiscal audit unit rejecting the use of so-called linked accounts in the MRS Logística repactuation agreement.
The court’s fiscal unit (AudFiscal) argued that the R$2.8 billion the operator may deposit into such an account qualifies as public funds and should enter the federal budget. In its view, the government’s plan to bypass the Treasury undermines constitutional principles of centralized revenue management. “The case under review configures a typical obligation to pay values to the Union,” the unit wrote, stressing that administrative discretion cannot override budgetary rules.
Dispute Over Concession Model
The government has sought to replace the direct execution of off-contract projects by concessionaires with deposits in linked accounts, managed under the supervision of the National Land Transport Agency (ANTT). The mechanism is part of the cross-investment model introduced by law in 2017.
In the case of MRS Logística, controlled by Vale SA (VALE3) and other shareholders, the funds would be allocated to new concessions through competitive bidding. The transport ministry insists the approach ensures greater efficiency, transparency, and alignment of incentives.
Legal and Political Front
Supporters of the plan cite precedent: in 2020, the TCU approved a similar arrangement for Vale (VALE3) to build a stretch of the Ferrovia de Integração Centro-Oeste (Fico), without the funds entering the Treasury. The Attorney General’s Office (AGU) has also backed the model, saying it provides legal certainty and shields projects from fiscal constraints.
“The mechanism ensures that project sustainability will not depend on the existence or availability of budgetary resources,” the AGU noted, adding that priority should remain with essential areas like health, education, and public security.
Pushback From Oversight Bodies
The TCU’s Public Prosecutor’s Office (MPTCU) earlier criticized the mechanism as an exercise in “creative accounting.” The AudFiscal opinion echoed this, stating the arrangement more closely resembles public revenue than private fund management. “It is not even adequate to qualify the case as ‘cross-investment’,” the unit wrote. “What we observe is a deviation from the constitutional rule of revenue centralization.”
The case is now in the hands of the TCU plenary, under the rapporteurship of Minister Jorge Oliveira, in what could set a precedent for upcoming railway concession contracts.