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):
2010 (projection) : 2,18%
Compared to other countries:
According to PricewaterhouseCoopers, Percentage of highways that are covered with pavement in BRIC countries:
According to ANTF (Associacao Nacional dos transportadores ferroviarios or National Association of Railroad Transporters)
Average speed of cargo:
Brazil: 25 km/h
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
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.
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
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:
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.