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Brazil  Biggest Challenges Ahead: Infrastructure and Education



An efficient and well developed infrastructure is a basic requirement for any country seeking long-term economic growth. Fortunately, the poor level of infrastructure in Brazil is finally being acknowledged as a problem. During the runoff round of the last presidential campaign involving Dilma and Serra, the topic of infrastructure reform was brought up a good number of times. The only problem here is that the one candidate who seemed to know it best ended up losing the election: JoséSerra.

This does not mean that Dilma will not address the issue of infrastructure. She has announced she is continuing with a program called PAC (Growth Acceleration Program), which was created by the Lula administration in 2007. This program has the goal of increasing the coverage and quality of infrastructure networks together with better access to water, sanitation, housing, electricity, transport, and energy. Since its launch, the program raised R$504 billion in investment for the 2007–10 period. The money was allocated as follows: R$171 billion for social infrastructure, R$275 billion for energy-related projects, and R$58 billion for logistics. Even though it has been three years since the creation of PAC, meaningful results are yet to be seen. Infrastructure in Brazil becomes an even bigger problem when talking about hosting the World Cup and Olympic Games in the upcoming few years. There is so much work to be done and the amount of time left is only getting shorter. Brazil's government needs to step up its game and manage to get the private sector involved in remodeling the infrastructure of the country.

While PAC meetings are taking place and money is being allocated, the situation in Brazil is this: more people are spending the night at airports, bad roads are continuing to cause accidents, ports still look like they did in the 80's, heavy rain continues to cause floods and mudslides, and energy blackouts still happen once in a while. According to the Latin Business Chronicles, while Brazil has improved eight places since 2008 for the overall quality of its infrastructure, it still ranks a middling 62nd in this regard. Other areas have ranked the following: transport and electricity (67th) and telephony infrastructure (65th). The most problematic areas, as highlighted by the GCI, are the quality of port infrastructure (123rd), roads (105th), air transport infrastructure (93rd), and, to a lesser extent, railroad infrastructure (87th) and mobile telephony (76th). These numbers show how the country still has a long way to go if it wants to keep up and sustain economic growth.

The solution to this is would be a combination of 1) sense of urgency and 2) the involvement of more private investment. The truth is that the federal government cannot take on this issue alone, especially considering that this is not the only problem needing solution in order to maintain growth. Private entities (including FDI) have both the capital and the expertise to get the job done. From a personal viewpoint, a good idea to start off with some progress would be to privatize INFRAERO before the entire industry falls apart. It is pretty clear that the government does not want to pass on all the glory to private investors, so the best option here is to give more confidence to private investors and expand the so called PPPs (Public-Private Partnership) and work together. But before this can happen, Brazil has to attract more private investment—and this must be done soon. The government is the only entity capable to incentivize the private sector to jump in and participate. Private investment in infrastructure can be easily marketed by emphasizing the protection of return on investments and having more predictable regulations. Brazil already offers low political risk and a stable currency. All it needs now is to attract more FDI and its own domestic investors.


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