Brazil Seeks $66 Billion In Private Investments To Improve Roads, Railways

Last Updated: 16, August 2012

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The Brazilian government is set to sell off the rights to nearly 7,500km of roads and 10,000km of railways for private investors to operate, said President Dilma Rousseff on Wednesday, in the hopes of raising $66 billion to improve the nation’s public infrastructure.

According to the Financial Times, Rousseff intends to sell concessions in nine highways and 12 railways before moving on to other areas of transportation, including “airports, ports and waterways.”

[quote]”We’re starting an initial stage from which Brazil will emerge richer and stronger,” said Rousseff, as cited by the Associated Press. “Brazil will finally have an infrastructure that’s compatible with its size.”[/quote]

The Brazilian president added that the sale of concessions did not mean that the government was getting rid of public assets, but rather “we are making partnerships to expand the infrastructure of the country.”

Private companies are expected to invest close to $45 billion on improving the nation’s train system, while the investment in road works is expected to reach $21 billion.

The measures would double the capacity of Brazil’s public transportation system, said transport minister Paulo Passos at an event announcing the sale, who also noted that privatization would fix “decades of backwardness and ensure the lowest possible costs” for the public.

Despite being the sixth largest economy in the world, the World Economic Forum ranks Brazil at 104^th in the world for public infrastructure.

“Brazil still suffers from weaknesses that hinder its capacity to fulfill its tremendous competitive potential,” the report stated, adding that the “lagging quality of its overall infrastructure” is an area of “increasing concern.”

Bret Rosen, a senior credit strategist for Latin America at Standard Chartered, also warned that fulfilling the government’s plan may prove to be harder than expected.

[quote]“The easy thing is making the announcements, the harder thing is execution, and the track record not just of Brazil but of Latin American countries in general is pretty poor on infrastructure,” he said.[/quote]

Most analysts however praised the plan, on condition that the government followed through.

“It’s important that after more than 20 years, the government has left behind ideology and opened the projects to participation by private enterprise,” said Clesio Andrade, head of the industry group the National Transport Confederation, to AP. “That gives a lot of strength to the projects and will help generate more jobs.”

“The stimulus spending, because that’s what it is, is excellent, especially when complemented with medium- and long-term measures to address the underlying challenges,” added Steven Bipes, a Rio-based senior advisor at the Albright Stonebridge Group consultancy firm.

[quote]“It’s overall very positive because it takes an integrated approach to these issues, instead of dealing with them in an ad hoc fashion,” he said.[/quote]

On Wednesday, President Dilma Rousseff also admitted that the country had sped up its plans to improve the nation’s infrastructure ahead of the 2014 World Cup and the 2016 Olympics.

“Since last Sunday, we have been an ‘Olympic country’,” she said. “We are in a countdown to the games in 2016.”

Brazil’s richest man, billionaire Eike Batista, who has direct interests in the infrastructure improvements with his commodity businesses, also cheered the new government initiative, describing it as a “kit for happiness” and “spectacular” for Brazil.

[quote]”Brazil needed to catch up to 20 years” of transportation improvements, Batista said.[/quote]

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