Author: Renée Pereira

Source: The State of S. Paulo - 11/05/2010

Brazil will have to double the volume of investments in infrastructure if it is to maintain sustainable growth of 5% per year in the next decade. A study prepared by the American bank Morgan Stanley to which the “State” had access shows that, if it stays at the current level, in a short time the advance of GDP will be stopped by bottlenecks in ports, railways, airports and highways.

In addition, the country will not be able to efficiently host events such as the World Cup (2014) and the Olympics (2016).

In recent years, the volume of investments in infrastructure has dropped from 5,4% of GDP in the 70s to 2,1% in the current decade. The reduction caused the scrapping of several sectors, which began to be pressured by the stronger demand of the economy. An example is the huge queues at the ports during the peak soybean harvest period. Without dredging in maritime channels and expanding land access, port terminals were unable to meet demand.

“This lack of investments has caused serious distortions for national production”, highlights the bank's director, Marcelo Carvalho, responsible for the 64-page study, all dedicated to infrastructure. According to him, the soy produced in Mato Grosso is highly competitive until it leaves the farm. But much of that competitiveness is lost along the way, due to logistical problems.

Carvalho believes that Brazil will be able to face the infrastructure challenge and accelerate the volume of investments. The first signs of this optimism are in the figures of the National Bank for Economic and Social Development (BNDES) for the period between 2010-2013. The estimate is that the sector will receive R $ 274 billion, 37% higher than the volume disbursed between 2005 and 2008, the study shows.

Alert. An important fact is that much of the money to expand basic services will continue to come out of the coffers of the private sector. In the last ten years, these investors were responsible for 90% of the total injected in the country. Therefore, Carvalho points out, Brazil needs to prepare the business environment to attract capital, especially abroad. There is much to be done to match other nations, he warns. Among the biggest concerns is the tax burden and bureaucracy. "Today companies spend 2.600 hours a year to prepare tax payments, compared to an average of 224 hours in other countries." According to him, despite the countless opportunities, all this weighs when an investor decides to put his money in Brazil.

Another point to be rethought is the issue of current spending in Brazil. This is important to make room for investment. Today, he says, the federal government invests only 1% of GDP.

deficiencies

5,4%
of GDP was applied in
infrastructure in the 70s

2,1%
of GDP is applied in
infrastructure in the current decade

90%
investment made in
sector comes from the private sector

$ 274 billion
is the forecast of BNDES investment in the sector between 2010-2013

37%
will increase the value of investments compared to 2005/2008