BRASILIA — Brazil on Wednesday unveiled measures to lure up to 133-billion real ($66bn) in private investment for road and rail projects, part of a new state-led effort to improve the country’s ageing and overburdened infrastructure.
The stimulus measures, the latest in a flurry of government steps to boost Latin America’s largest economy and pave the way for higher growth rates, focus on concessions for improvements to road and rail. Similar concessions for airports and seaports are expected in the coming weeks.
The projects amount to the biggest batch of concessions launched yet by Brazil, which is struggling to upgrade transport infrastructure before it hosts the 2014 Soccer World Cup and 2016 Summer Olympics.
The steps are also an effort by President Dilma Rousseff to modernise Brazil’s economy, which has stalled over the past year after average growth of more than 4% over much of the past decade.
By making improvements to infrastructure, the government hopes it can clear troublesome bottlenecks. Not only would such improvements help to lower costs for business, they are needed to accommodate future growth as the government scrambles to speed up investment and planning for big infrastructure projects.
But the investment plans are almost certain to run up against a series of hurdles that could slow their implementation, from Brazil’s mind-boggling bureaucracy to long delays in obtaining environmental permits.
"This is a crucial step to lower the ‘Brazil cost’," said Humberto Barbato, head of the electronics industry body, using a common phrase to describe the mix of high taxes, red tape and infrastructure woes that make Brazil such an expensive place to do business. "Now, the real question is how long this is going to take."
Ms Rousseff, speaking before dozens of business men in the capital, Brasilia, said the measures would help Brazil become "richer, stronger, more modern and more competitive", with "infrastructure compatible with its size".
Ms Rousseff stressed that the government would continue to take the lead. A new state-run company would be created to manage future infrastructure planning. Brazil’s BNDES development bank, the main source of corporate credit in the country, will provide subsidised loans.
"We will continue to fulfil our role as the driver of development," Ms Rousseff said.
The government hopes the investments can also help to galvanise Brazil’s economy. The Rousseff government has taken a series of consumer-focused measures over the past year, such as tax breaks for targeted industries, but the economy has been slow to react. Ms Rousseff told reporters the steps should help to pave the way for Brazil to eventually reach annual growth rates of 5%.
That would mark a big jump from growth of less than 2% expected this year. But officials noted that the investment would take place over a five-year period, meaning that the effect would be felt sooner rather than later.
"This isn’t a programme for investments to be diluted over the next 15 or 20 years," said Transport Minister Paulo Passos.
The programme foresees concessions to expand the country’s old and overloaded road and rail systems. In addition to plans for major highways, the government hopes to attract investment for up to 10,000km of rail network.
Economists welcomed the measures, having long argued that Brazil must clear its clogged roads, ports, railways and airport terminals. So deficient is the infrastructure that many of its big mining, steel and other commodity companies operate their own private rail, road and port facilities.
"Concessions have to be granted from a market perspective, not a social perspective," warned Paulo Resende, a logistics professor at the Fundacao Dom Cabral business school.
Reuters
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