Brazil Infrastructure Spending Slows

By Maria Lopez Conde, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Brazilian government has spent only 17.6 percent of the R$130.4 billion authorized for investments in the country in the federal budget this year, according to a report from the National Treasury. This is less than during the first four months of last year, when the government spent R$21.1 billion, or 22.58 percent of 2012’s R$93.4 billion budget.

The federal government’s investments remained stagnant in relation to the GDP during the first four months of the year, hovering around 1.51 percent over the total goods produced in the country during that period.

Government data also reveals that the three organs which should be driving the expenditures have not seen investments rise dramatically.

While the Rousseff government has promised increased spending on transportation infrastructure, to mainly improve roads, ports and airports and make Brazil a more competitive country, the Ministry of Transportation’s investments fell from 13.28 percent to 12.85 of budgeted expenses this year, according to O Globo.

National Integration, the government organ in charge of large-scale irrigation and infrastructure projects, saw its approved expenditures decrease to 9.69 percent compared to last year’s 14.03 percent. The Ministry of Cities, which handles among others the Minha Casa, Minha Vida (My House, My Life) investments, also saw payments plummet to 29.53 percent from 49.17 percent compared to the same time period last year.

The Ministry of Planning, tasked with controlling the federal budget and approving of project spending, attributed the disappointing rate of expenditures to the slow approval of the Annual Budgetary Law (LOA), Brazil’s yearly budget, which passed 71 days later than scheduled.

In a press release, the Ministry of Cities also blamed the late budget and said it expects to see more investments this year. “In the next quarters, the tendency is for the flow of payments of the ministry to reach levels equivalent or superior to those of 2012,” it said.

Brazil, a large country with vast natural resources, has lagged behind other emerging markets in infrastructure expenditures for years. The country used to spend around five percent of its GDP on infrastructure in the Seventies, but in the last ten years, that kind of spending has dropped to two percent. An amount that, according to experts, cannot sustain much growth.

One initiative backed by the federal government that did see positive figures in public investments was the Programa de Aceleração do Crescimento (Growth Acceleration Program, PAC 2), funded by mostly state and local governments, foreign institutions and private actors.

In the first four months of 2013, the PAC invested R$557.4 billion in logistics, social and urban infrastructure, the federal government announced this past Monday. This corresponds to 56.3 percent of the budget allocated to the program until 2014.

Although it did register a rise in investments, the rhythm of expenditures was 26 percent slower than in the last quarter. Around 54.9 percent of the construction projects planned under the PAC 2 have been completed to this day.

At the beginning of the year, the government had announced it had spent 47.8 percent of the R$1 trillion set aside for investments for the 2011-2014 period. However, investments in housing, and not infrastructure, are driving over thirty percent of the PAC expenditures for the years 2011-2014.

The program has built 1,889km of roads, with 7,349 km in progress. It is also investing heavily in airports and in improving the capacity of the country’s power grid with hydroelectric plants and wind farms, among others.