Brazil Infrastructure Report Q1 2008

Brazil possesses well-developed agricultural, mining, manufacturing and service sectors and is one of the fastest-growing economies (also the ninth-largest globally) in the world. Development in infrastructure is being driven by public-private partnerships (PPP), whereas the Brazilian construction industry is being spurred by strong government investment. Private-sector interest in the construction segment has been increasing, as is evident from the growing number of public offerings on the stock exchange.

The leading construction companies are well entrenched in the country and are significant players outside Brazil. The federal government's growth acceleration plan Programa de Acelerao do Crescimento (PAC) was unveiled in January 2007. It is expected to facilitate faster turnaround of construction projects that are in the pipeline. The programme also involves funding projects in the oil and gas, transportation and sanitation sectors and aims to spur BRL500bn (US$235bn) of infrastructure development during 2007-2010. For instance, the government recently announced the expansion and modernisation of the country's main international airport, Guarulhos, at a cost of US$832mn. The government has announced the allocation of funds for various states for urbanisation, slum rehabilitation and sanitation, among others.

However, the nation's transport infrastructure suffers from inadequate funding and lack of focus, leading to slow progress in the development of roadways and port terminals. Private investment generated through PPP has been beneficial only at the regional level. The laws regarding foreign companies are not liberal and stipulate that they either have a Brazilian partner or be established in Brazil in order to provide construction services.

Despite the risks, BMI forecasts an average construction-industry growth rate of 3.0% during 2008-2012.

Foreign investment in construction, coupled with increased government expenditure, is likely to fuel the industry growth rate. The government is also conducting preliminary studies regarding linking of various cities by rail, road, waterways and airways. Increased focus on infrastructure by the government is likely to spur further growth in the sector.