Of every 100 reais (US$30.8) invested into infrastructure in Brazil by the end of suspended president Dilma Rousseff's first term in 2014, 83 reais came from public banks.

According to a study conducted by the National Industry Confederation (CNI), development bank BNDES, public bank Caixa Econômica Federal and the treasury were responsible for 138bn reais of the total 166bn reais disbursed for investment in transport, electric energy, telecommunications and sanitation in 2014. BNDES alone was responsible for almost half of all the loans.

"The current economic situation and the reality of this new president [Michel] Temer government will prevent this from happening again," Claudio Frischtak, president of Inter.B and one of the study co-authors, told local news outlet Estadão. "But we have a very heavy legacy that we will pay for in the coming decades."

According to Frischtak, this dependence on public funding has created several distortions in infrastructure projects.

"It's as if the government threw a party for a few people who decided to get drunk, and the rest of us have to pay the bill in the coming years," he said.

The study notes that Brazil should invest between 4% and 5% of GDP in infrastructure in order to get closer to countries with similar levels of development. Currently, just over 2% of GDP is invested in infrastructure.

CNI does not expect Brazil will be able to up its investments in infrastructure to that level in the short term, due to both macroeconomic constraints and a lack of quality projects.

 

Source: BNamericas

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