Brazil’s Infrastructure Challenges

Reading about the problems related to infrastructure in Brazilian magazine VEJA, made me think about the time I worked as an agricultural commodities trader for Noble Group. I visited farms in Mato Grosso, a big state located in the center west of Brazil and  responsible for about 30%  of the country’s total production of soybeans. I saw the dreadful situation of railroads and highways that take this massive production to ports, mainly port of Santos (in Sao Paulo state, distance of about 2000 Kilometers ) and Paranagua (Parana State, distance of about 2250 Kilometers). It is shocking. Many highways are not even covered with pavement. In the railroads, there is a ridiculous monopoly by ALL (America Latina Logistica) that made me feel as if a textbook case from the beginning of the XX century became real.

The problems in infrastructure reduce immensely Brazil’s competitiveness. Yet, Brazil can still export agricultural commodities with very low prices. Brazilians call themselves “the country of the future” because they imagine how competitive they will be when their infrastructure problems are solved.

Here are some facts related to Brazil’s infrastructure. To easier comprehension I have selected a few countries to compare with:

 

Brazil’s investment in infrastructure as % of the GDP

According to IPEA (Instituto de Pesquisa Econômica Aplicada or Research Institue of Applied Economics, related and totally sponsored by the federal government):

2002: 2,2%

2004: 1,85%

2006: 2,11%

2010 (projection) : 2,18%

Compared to other countries:

India: 5,63%

Colombia: 5,8%

Chile: 6,2%

China: 7,3%

 

Highways

According to PricewaterhouseCoopers, Percentage of highways that are covered with pavement in BRIC countries:

BRASIL: 6%

INDIA: 63%

RUSSIA: 67%

CHINA: 80%

 

Railroads

According to ANTF (Associacao Nacional dos transportadores ferroviarios or National Association of Railroad Transporters)

Average speed of cargo:

Brazil: 25 km/h

USA: 80km/h

Brazil grows

GDP in 1958:  262 Bi R$

GDP in 2010: 3,10 Tri R$

But the total length of rails shortens:

In 1958: 37967 Kilometers

In 2010: 29637 Kilometers

 

Airports

Lula’s administration promised to invest 5,5 billions Reais in airports in the 12 hosting cities where there will be World Cup matches in 2014. Nonetheless, so far only 195 millions Reais were allocated (3,5% of total) and 54 milllion Reais executed (0,98%).

According to McKinsey&Company, in the airport of Cumbica, in Sao Paulo, every hour 65 airplanes ask for permission to land or to take off, and the maximum capacity is 53 per hour. The situation is similar in Brasilia. In airport Juscelino Kubitschek, 45 airplanes ask to take off or to land, with a maximum capacity of 36 per hour.

 

Ports

According to the Containerisation International Yearbook, average time of permanence of containers before leaving port :

SANTOS: 17 days

WORLD AVERAGE: 5 days

Ethiopia: 30 days

Sweden: 2 days

 

Electricity

According to EPE – Empresa de Pesquisa Energetica ( Energy Research Company, related to Ministery of Energy and Mines)

Electricity is too expensive in Brazil:

In 2007, price in dollars per MWh:

BRAZIL: 138

MEXICO: 102

GERMANY: 84

USA: 64

FRANCE: 56

In conclusion, Brazil cannot continue to operate hand to mouth. The biggest challenge of Dilma Rousseff’s administration is to complete complex, pertinent, and sometimes strikingly obvious, infrastructure projects without too much corruption.

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About Ricardo Geromel

Ricardo was born and raised in Brazil but also has Italian citizenship. He holds a bachelor’s degree in business management from Fairleigh Dickinson University. This erratic blogger is a master candidate in Paris at ESCP-Europe, but presently in a gap semester. He speaks five languages and has worked as project manager for Bolloré Group in Guinea Conakry, West Africa and as agricultural commodities trader for Noble Group in Switzerland, Hong Kong, Argentina, Paraguay, Uruguay and Brazil.
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9 Responses to Brazil’s Infrastructure Challenges

  1. Pingback: Infrastructure Challenges (via Brazil Global) « Expat American Living in Brazil

  2. Hildete,
    Are you sure about the 6% paved road coverage. That looks low to me.
    Thanks,
    Steve

    Like

    • Hildete Vodopives says:

      Hi Stephen, this number looks low indeed. Let’s check with Ricardo, as he is the author of this post.
      thank you very much for your comment!
      I checked your blog by the way.. very impressive.
      best, Hildete

      Like

    • Hi Steve,

      Unfortunately, this extremely low figure is correct according to PricewaterhouseCoopers…

      If you send me your email, I can send you my source.

      I also visited your website. Very interesting business model. Congrats!

      Have a good week and thanks for your posting

      Like

  3. Ivan Avila says:

    There is an excellent railway covering the west of Paraná called Ferroeste with 248kms linking Guarapuava to Cascavel. Unfortunately because of the monopoly of ALL in the region even if the producers try to shift their production through Ferroeste (Soya, Corn, etc) and bring in fertilizers and other products that they still have to rely on the ‘desires’ of ALL to complete the rest of the journey to either Paranagua or Antonina.
    Agree entirely on the fact that Brazil needs berths and railway tracks. We have over the years discussed and forced this issue and finally there are voices coming forward; we need infrastrucutre to be competitive.

    Like

  4. Robert Dwek says:

    Hi, thanks for an interesting website. I have mentioned it on my blog. As a Brit living in Sao Paulo for the past five months, I have not formed a positive view of Brazil, sadly. It is good to see all perspectives when discussing something as big as a country so I’ll check back here to read more of your views. I still feel there is too much optimism underlying predictions for Brazil’s economic future. For example, this infrastructure problem, and the almost total lack of progress in recent years, makes me think that Brazil is once again going to miss all deadlines. Where is the sense of urgency in this country and the belief that the public good MUST come before private, short-term profit ?

    Like

  5. Robert, thank you for your comment. We appreciate critical points of view.. yes I agree with you: the notion of public good is often disregarded in Brazil. Public opinion should have a more active voice and demand better public services .. but you know public generally means “nobody’s concern”. But I also believe this is a matter of exercise. So every effort will make a difference.

    Like

  6. Tessa says:

    Hi,
    As an economist student currently studying Brazil this is a great article to read on the problems it is facing on developing and why. I was wondering if it was possible to send me the links for where you attained the data at all? Or perhaps the names of the articles or journals so that I could do further reading on it? Many Thanks

    Like

  7. Pingback: Brazil Global’s top posts of 2011 | Brazil Global

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