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Underinvestment Leaves Brazilian Infrastructure In Critical Condition
(MENAFN- The Rio Times) Brazil faces a severe infrastructure crisis, with investment levels at their lowest since 2013. Economist Claudio Frischtak from Inter.B consultancy emphasizes the urgent need to increase infrastructure spending to 4–4.5% of GDP annually.
Currently, investments are below 2%, leading to rapid deterioration of existing assets. Doubling investment over the next two decades could enhance public welfare, business competitiveness, and resilience against increasingly frequent extreme weather events.
A study commissioned by the National Union of Heavy construction industry (Sinicon) reveals that Brazil's infrastructure capital stock is only 35.5% of GDP.
This figure should exceed 60%, according to the Institute of Applied Economic Research (Ipea). Historically, the highest capital stock was 53.4% in 1983, a level briefly regained in 1992. Since then, it has steadily declined, with a slight recovery from 2014 to 2016.
The government struggles even to maintain existing infrastructure. From 2022 to 2024, annual investment fell below 1.9% of GDP.
Maintaining infrastructure requires at least 1.4% of GDP annually. In 2024, the capital stock reached its lowest point since 2013 at 35.5% of GDP.
Frischtak points out that Brazil not only needs more investment but also better allocation of resources. Many projects lack strategic planning and waste resources.
He suggests treating infrastructure projects as state rather than government initiatives to ensure continuity beyond individual administrations.
Brazil's Infrastructure Investment Strategy for Growth
This year, Brazil plans to invest R$212.7 billion ($37.98 billion), or 1.85% of GDP, with R$142 billion ($25.36 billion) from private sources and R$70.7 billion ($12.63 billion) from public spending.
Humberto Rangel, Sinicon 's executive director, warns of a vicious cycle where insufficient revenue limits investment, hindering growth.
The Ministry of Transport advocates for increased public investment and private sector involvement through public concessions.
A report by the National Confederation of Transport (CNT) shows that in 2023, 67.5% of Brazilian roads were rated regular to poor, while only 32.5% were good or excellent.
The fiscal spending cap between 2017 and 2022 severely restricted public investment in transport infrastructure, according to George Santoro from the Ministry of Transport.
Railway issues stem from poor planning and execution of publicly funded projects, particularly affecting the Northeast's connection with the Southeast.
Energy and telecommunications sectors face similar investment shortfalls but are less severe than transport.
Frischtak's study suggests continuous programs beyond government terms with medium- and long-term planning for regulatory stability and predictability.
Rangel proposes incremental annual increases of 0.2 percentage points relative to GDP as a realistic approach despite fiscal challenges, aiming for sustained private investment attraction.
International experience indicates that each 1% increase in infrastructure capital stock relative to GDP can boost growth potential by 0.05-0.1%.
Rangel emphasizes planning's crucial role: "If Brazil aims to increase grain production from 300 million to 400 million tons within ten years, more infrastructure is essential."
Currently, investments are below 2%, leading to rapid deterioration of existing assets. Doubling investment over the next two decades could enhance public welfare, business competitiveness, and resilience against increasingly frequent extreme weather events.
A study commissioned by the National Union of Heavy construction industry (Sinicon) reveals that Brazil's infrastructure capital stock is only 35.5% of GDP.
This figure should exceed 60%, according to the Institute of Applied Economic Research (Ipea). Historically, the highest capital stock was 53.4% in 1983, a level briefly regained in 1992. Since then, it has steadily declined, with a slight recovery from 2014 to 2016.
The government struggles even to maintain existing infrastructure. From 2022 to 2024, annual investment fell below 1.9% of GDP.
Maintaining infrastructure requires at least 1.4% of GDP annually. In 2024, the capital stock reached its lowest point since 2013 at 35.5% of GDP.
Frischtak points out that Brazil not only needs more investment but also better allocation of resources. Many projects lack strategic planning and waste resources.
He suggests treating infrastructure projects as state rather than government initiatives to ensure continuity beyond individual administrations.
Brazil's Infrastructure Investment Strategy for Growth
This year, Brazil plans to invest R$212.7 billion ($37.98 billion), or 1.85% of GDP, with R$142 billion ($25.36 billion) from private sources and R$70.7 billion ($12.63 billion) from public spending.
Humberto Rangel, Sinicon 's executive director, warns of a vicious cycle where insufficient revenue limits investment, hindering growth.
The Ministry of Transport advocates for increased public investment and private sector involvement through public concessions.
A report by the National Confederation of Transport (CNT) shows that in 2023, 67.5% of Brazilian roads were rated regular to poor, while only 32.5% were good or excellent.
The fiscal spending cap between 2017 and 2022 severely restricted public investment in transport infrastructure, according to George Santoro from the Ministry of Transport.
Railway issues stem from poor planning and execution of publicly funded projects, particularly affecting the Northeast's connection with the Southeast.
Energy and telecommunications sectors face similar investment shortfalls but are less severe than transport.
Frischtak's study suggests continuous programs beyond government terms with medium- and long-term planning for regulatory stability and predictability.
Rangel proposes incremental annual increases of 0.2 percentage points relative to GDP as a realistic approach despite fiscal challenges, aiming for sustained private investment attraction.
International experience indicates that each 1% increase in infrastructure capital stock relative to GDP can boost growth potential by 0.05-0.1%.
Rangel emphasizes planning's crucial role: "If Brazil aims to increase grain production from 300 million to 400 million tons within ten years, more infrastructure is essential."
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