Economy

According to the Inter-American Development Bank, Over the last two decades, Brazil overcame a long period of inflation and implemented an effective macroeconomic management framework, based on fiscal responsibility and clear rules governing the relationships among the different levels of government, and on an inflation-targeting regime with a floating exchange rate. Poverty reduction policies, particularly the Bolsa Família program (PBF), have achieved significant results, lifting about 28 million Brazilians out of poverty and reducing the Gini income distribution coefficient from 0.59 to 0.54 between 2002 and 2009. In that period, economic growth attained a higher level (4.4% per year on average between 2004 and 2010), after over two decades of sluggish growth. With the international crisis of 2008-2009, the economy decelerated for two quarters, before recovering rapidly on the back of countercyclical policies, including a strong expansion of public credit. Inflationary pressures started to build as economic activity gathered pace, and this was aggravated by supply shocks and a readjustment in monitored prices in late 2010 and the first half of 2011. Since August 2011, the deteriorating global economic scenario has helped moderate inflationary expectations and led the central bank to embark on a new cycle of cuts in its base interest rate. For Brazil to take advantage of existing opportunities and continue the virtuous development of the last few years, many challenges need to be overcome. The level of infrastructure investment—which exhibits major deficits in the areas of transportation, logistics, energy, and sanitation, affecting the productivity of the economy as a whole—needs to continue rising on a sustainable basis, with greater private sector involvement, while also making it possible to strengthen regional integration. Long-term financing for public and private sector investments remains a problem to be resolved, along with the strengthening of an agenda to improve the business climate, productive and industrial development, promotion of science, technology, and innovation (ST&I), and an expansion of access to credit by micro, small, and medium-sized enterprises (MSMEs).

Infrastructure Investment in Northeastern Brazil

August 12, 2013 |

Banco do Nordeste | Brazil | Chris Cote | energy | Infrastructure | Mark Langevin | Northeast | Transportation

Infrastructure Investment in Northeastern Brazil

Challenges and Opportunities in a Developing Region

A BrazilWorks Briefing Paper

Prepared by Chris Cote and Mark S. Langevin, Ph.D.

Summary

The Northeast region is growing faster than the national average due to a high performing service sector, retail sales, and tourism.

Brazil’s current infrastructure deficit is the result of several decades of declining public and private investment.

To lessen this deficit, the Brazilian Federal Government has launched two national Growth Acceleration Programs (PACS 1 and 2) since 2007 to remedy insufficient physical infrastructure, especially in the energy and transportation sectors.

Transportation investments focus primarily on road and rail improvements, but the new port concession law should attract increased private sector investment to an expanding list of ports.

Public investments in airport expansion are needed to confront the immediate challenge of the 2014 FIFA World Cup and the long-term growth in passengers and the tourism industry.

Energy investments in the region are concentrated in oil refineries, thermoelectric plants, wind energy farms, and expansion of the transmission system.

The private sector must take a greater role in expanding and improving transportation and energy infrastructure throughout the region to guarantee sustained economic growth.

Read the entire briefing paper here:

BrazilWorks Infrastructure Investment and Challenges in Northeastern Brazil

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