Brazil’s government has announced a stimulus package worth R133 billion ($66 billion) designed to improve its transport infrastructure and recover economic growth, which has slowed to less than 2% over the past year, down from 7.5% two years ago.
Up to $20 billion of the sum will be used to build 7,500km of road and $45 billion will be used to build 10,000km of rail track. Brazil’s president, Dilma Rousseff, said the improvements would pave the way for annual growth rates to return to around 5%.
The problems caused by Brazil’s ageing infrastructure are well known, not least in the automotive sector, with investment in infrastructure under 1% of GDP last year. Bureaucracy has played as much a part in the problem of an underdevelopment that has left Brazil lagging behind China, which by comparison has invested extensively in infrastructure. Brazil is also burdened by a high tax, which is equal to 36% of GDP.
Several carmakers have postponed new investments because of slow sales in the country during the first half and have been waiting to see what sort of incentives for growth the Rousseff administration was going to introduce. That said, Renault is proceeding with a $19.5m expansion at its Curitiba plant to raise annual capacity by 25% to 500,000 units. Work is expected to be complete by next year.
Toyota is another manufacturer expanding its presence there having recently inaugurated its third plant in Sorocaba this month for production of the Etios. The $600m plant will have an initial production capacity of 70,000 vehicles. Toyota wants to double sales by next year to 200,000 vehicles.
Following talks between Rouseff and Toyota’s president Akio Toyoda this month, the carmaker also announced plans for a $495m engine plant in Porto Feliz, to be ready by 2015.
The government is now hoping to speed up the sort of development seen in China and solve problems with bottlenecks across its transport infrastructure to support the production goals of carmakers such as Renault and Toyota. Speaking to reporters last week at an event in Brasilia, Rousseff said the measures being taken would give Brazil an infrastructure compatible with its size.
The latest project will comprise of both state and private investment. The roads will be built by private companies that will apply for the contracts and enforce tolls on the road to cover the costs. The Brazilian government will also provide loans from the state development bank for both road and rail, and will establish a state-owned company that will manage the purchasing and planning process. Brazil’s BNDES development bank will provide subsidised loans for the projects.
Announcements are expected soon on plans for port development, while investments continue in the air sector.