Infrastructure: How to Reduce the Gap

The Ministry of Infrastructure has already transferred 74 assets to the private sector, reaching a figure of R$ 80 billion in contracted investments. Additionally, the largest road auction in the country is scheduled for the end of October, involving the privatization of Via Dutra, which includes the Rio-Santos highway. The government is also working on concession bids for airports, including Congonhas in São Paulo and Santos Dumont in Rio de Janeiro, as well as auctions for the privatization of the Espírito Santo Port Authority and the ports of Santos-SP, São Sebastião-SP, and Itajaí-SC.

As is known, the country will not escape from the current process of deindustrialization that condemns it to return to the condition of a raw material supplier if it does not restructure its infrastructure, which includes improving the road and rail systems, as well as ports and airports. To achieve this, it is necessary to advance in concession programs to attract national and foreign resources. At the same time, the country needs to make progress in tax reform, eliminating the constraints in legislation, and reducing bureaucracy. Without this, it is unlikely that major investors will be attracted to make investments. According to the annual report of Infra 2038, prepared by the consultancy Pezco Economics, Brazil needs to double its level of infrastructure investments to reach an adequate level and make a leap in the competitiveness of the economy. For this, an estimated investment of R$ 339 billion per year until 2038 would be necessary, which would place Brazilian infrastructure among the top 20 in the world in The World Economic Forum (WEF) ranking of Geneva, which usually hosts the famous Davos meetings in Switzerland. But that’s not what we see. According to that study, infrastructure investment in Brazil fell from R$ 122.4 billion to R$ 115.8 billion in 2020 due to the pandemic, which is only 1.55% of Gross Domestic Product (GDP), when this share should be at least 5.5%. India and China, for example, invest more than 6% of GDP annually. For 2021, the projection is that the value will rise to R$ 137 billion, or 1.69% of GDP, recovering the 2019 level but still below the peak of the early 2000s.

Obviously, national and foreign private investment is essential, but it is crucial that public investment also occurs constantly and increases. And the government should not be limited to just allocating resources without turning the money into infrastructure, as was the case with the Growth Acceleration Program (PAC). Not to mention that there are assets that do not attract private initiative, which means that only with public investments will it be possible to carry them out. To get an idea of Brazil’s lag compared to developed countries, it is enough to remember that the national railway index is only 3.57 km available for every 1000 km2 of territory, while in Japan, which has the highest density in the world, the index is 46.57, according to the cited study. Brazil has only 25 km of paved roads for every 1000 km2 of area, which corresponds to 12.3% of the national road network. In the United States, it’s 438.1 km per 1000 km2 of area. In China, it’s 359.9 km, and in Russia, it’s 54.3 km, according to research by the National Confederation of Transport (CNT) from 2016. This means there is a lot of work ahead.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Institutional Relations Manager of the Fiorde Group, composed of the companies Fiorde International Logistics, FTA Transport, and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: www.fiorde.com.br

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