BRASILIA — As the largest country in Latin America, Brazil has a population of 210 million. A country of this size requires a massive amount of infrastructure across transport, water and power, public institutions and telecommunication services. Economic growth is highly dependent on investment in infrastructure anywhere in the world. However, infrastructure in Brazil has often failed to meet the needs of its citizens.
In the past two decades, annual investment in infrastructure in Brazil was 2.2 percent of its GDP, compared to the global average of 3.8 percent. Construction of basic public facilities has been lagging behind, which severely restricted economic growth in Brazil. Economic loss due to infrastructure comes about with the reduced quality of logistics and limited public services, while the reduced investment also means loss of job opportunities, lower incomes and falling government revenue.
In 2015, it was suggested by GO Associados data that the annual loss could reach $40 billion if Brazil is unable to complete the most fundamental investments in infrastructure each year. Recently, a dedicated secretariat was established by the Temer government, which reported that only 12 percent of roads in Brazil were paved while most were of poor quality. Additionally, 16 percent of the population had no access to clean and safe water and more than 100 million people had been disconnected from the sewage treatment system.
In many cases, Brazil heavily relied on external investment. Besides the shortage of market confidence and reliable loans, other problems in Brazil, such as bureaucracy, environmental issues and land expropriation, have constrained the growth of infrastructure in Brazil. So far, many projects have been suspended because of these problems.
For example, the Fiol railway connecting east and west was expected to be finished by 2012, while right now more than half of this project is still unfinished. In addition to the scarcity of funds, the absence of environmental permits and corruption cases involving managers also resulted in the interruption of construction.
In May 2015, Brazil officially announced that China would spent $50 billion helping to comprehensively upgrade infrastructure. Investments from China covers energy and transportation. In June 2017, China and Brazil launched a $20 billion investment fund, with 75 percent of funds contributed by China.
Due to the huge need for infrastructure, great opportunities are provided to foreign entrepreneurs seeking contracts. Brazil is open to foreigners owning and constructing infrastructure, due to the stress from financial and economic depression. As predicted by the global infrastructure center of the G20 research project, by the end of 2040, a funding gap of $1.2 trillion will remain for the required investment in infrastructures in Brazil.
Investment in infrastructure in Brazil also requires the enforcement of regulations, which is a key to the recovery of market confidence, according to Brazilian economist Cláudio Frischtak. “It is important for investors to restore the autonomy of agencies and eliminate their political impact, which will bring about more stable markets and lower the risks of regulatory,” he said.
Reliable investment and sensible planning will ensure that infrastructure in Brazil has a bright future.
– Xin Gao