Tuesday, August 3, 2010

Infrastructure Brazil's Limiting Factor for Foreign Investment

Infrastructure tops the list of concerns for business people considering investing in Brazil, according to a new report. Transportation is an especially sore spot for the country as it prepares to host the 2014 World Cup and the 2016 Summer Olympics.

This is an excerpt of a new report from UK-based bank HSBC, Brazil unbound: How investors see Brazil and Brazil sees the World.

In our survey, nearly one half of respondents (49%) point to “low standard or costly infrastructure including telephones, transport networks and utilities” as the main operational obstacle, far more than selected corruption, poor governance (34 percent) or skills shortages (32 percent), the state of transport infrastructure is particularly dire. In spite of some improvement in logistics, freight depends on costly road haulage; there are few railroads; the potential for waterways remains largely unexplored; and ports and airports are congested. This can add one quarter or more to the cost of getting goods to market, say investors.

Investing in infrastructure has been at the heart of President Luiz InĂ¡cio Lula da Silva’s growth program (the so-called PAC, launched in 2007), but progress has been limited. Fewer than half of the targets for 2010 have been met (with much of the proposed financing going to first-time home owners, rather than into physical infrastructure). High public spending commitments are crowding out the paltry 1 percent of GDP that is proposed for investment in infrastructure, while limited private sector investment in transport will not make up the shortfall.

Brazil: Shaky Infrastructure
Latin Business Chronicle
August 2, 2010