On Tuesday, the Brazilian government unveiled a 198.4 billion reais ($64 billion) infrastructure plan aimed at restoring economic growth through private investments in the country’s depleted roads, rail and ports. “The increase of investments in the Brazilian economy must be done by the private sector,” said Brazilian Planning Minister Nelson Barbosa. “There is a huge demand for better infrastructure in Brazil.”
Battered by high inflation, rising unemployment and a corruption scandal at state oil company Petrobras, Brazil is on the brink of a recession that is expected to be the worst in 25 years. During a ceremony to announce the spending plan on Tuesday, President Dilma Rousseff said the government plans to use market-friendly procedures to calculate the return rate on projects such as roads, where concessions will go to bidders that offer the lowest toll rate.
The government also aims to reduce its role in infrastructure projects, as the planned concessions will feature reduced subsidized funding from the Banco Nacional de Desenvolvimento Econômico e Social (National Social and Economic Development Bank—BNDES).
“Our model of concessions will guarantee that consumers get quality services at fair prices and companies get an adequate return on their investments,” said Rousseff during the ceremony. The concessions include about 2, 715 miles of highways, expansion of existing freight railways and even a railway linking the Atlantic Ocean with the Pacific Ocean via Peru. Repairing the roads will allow Brazil to get its commodities like soy beans to the market.
The government expects about a third of the infrastructure projects, or 69.2 billion reais, to be carried out by 2018, the last year of Rousseff’s second term. However, overcoming challenges like bureaucracy and the recent Petrobras scandal will be difficult for Rousseff and her government. Rousseff’s past 2012 infrastructure plan to put up 14 new railways for concession fell short of her targets, without a single auction after she unveiled the plan.
“It’s definitely a step in the right direction, but it’s going to be a long, long process of regaining credibility and testing new models,” said João Augusto de Castro Neves, Latin America director at political risk consultancy Eurasia Group regarding the new infrastructure programs.