BRAZIL PREPARING THE FUTURE

Meeting of the Latin American Federation of Banking and Insurance Workers FELATRABS in Rio de Janeiro. Left standing President José Trabulo, sitting next to him Secretary of Organization and Finances Miguel Duche and Secretary General Leonardo Marquez. On the right Carlos Gaitan, invited guest as former President of the Latin American Federation of Industrial Workers FLATI.

What can a country do that has so many debts that private investors don’t want to lent you more money?  That is the problem Greece is confronted with and Ireland and Portugal and who knows what country will be next. Of course, as an Euro country you can ask financial support of those countries with which you share the same money. But that also has its limits as we are seeing today in the Eurozone.

Maybe the answer is coming from Brazil that until now is a very healthy economy and the government wants to keep it like that. The left oriented Brazilian government has decided to invite private capital to invest the huge amount of 53 billion Euro ( about 66 billion US$) in the national road and railway infrastructure. In just 5 years the government wants to double the existing network of roads and railways.

The project was praised by the Brazilian industry. Finally one is going to invest in the aging transport infrastructure of the country. To give just one example: 90 percent of the Brazilian rail network goes back to the nineteenth and the beginning of the twentieth century. Trains have speed limits of 40 km per hour.

The billion-dollar project is an answer of the government of president Dilma Roussef to the moderate economic growth of Brazil. Last year the Brazilian economy grew 2.7%. This year a growth rate of 2% is expected. The last 10 years the Brazilian economy was growing with an average 4%. Roussef hopes that the investments in the sixth economy of the world will give additional impetus to the economy. The project will deliver 150.000 extra jobs. In 2014, the year of presidential elections, the first results of the projects should be visible.

In 2014 the World Cup Soccer will be held in Brazil. Photo made on the famous Copacabana beach of Rio de Janeiro.

Until 2010 Brazil seemed to be immune for the international crisis. The big, healthy Brazilian banks prevented Brazil in 2008 to be sucked into the international credit crisis. But since last year Brazil has also been affected by the economic downturn in the US and Europe. The country started to introduce budget cuts but also incentives to maintain economic growth. The focus was on boosting the domestic consumption. Taxes on cars were lowered and consumer credits less expensive. However, the results were not satisfying.

It is expected that in the first 5 years the amount of 32 billion Euros will be spend. In 2018 this should result in 10.000 km extra railways and 7.500 km. new highways. In the near future the south and the north of Brazil will be connected by railway. The other 21 billion Euros will be invested over a period of 30 years.

Of course there are also doubts whether such a large project can be successful. The government should attract investors on the capital market what will not be easy at the current financial climate. There are also doubts on the deadlines imposed by the government. To assign the railway and highway concessions, the government has earmarked only 13 months. Specialists say this is a very short period if you take in consideration that between 2003 and 2012 only 8 small highway concessions were granted.

One doubts also on the deadline 2018 when should be realised 10,000 km railway and 7,500 km. highway. The last time the government gave a concession was in 2008 for a highway of 270 km. for the amount of 280 million Euros. Until now only 40 millions have been spend.

Roussef hopes this time it will be different. Soon she will announce the privatisation of ports and airports. Brazil, guest country for the World Cup Soccer 2014 and the Olympic Games in 2016, will enter an era of historical infrastructural works and giant projects.

This is a summary of an article published in NRC Handelsblad, 17/8/2012 by Philip de Wit.