This article is part of the special report: Challenging perceptions: Brazil makes a comeback

The Brazilian government has ambitious plans to develop the country’s economy through a modernisation programme based on reducing bureaucracy, stimulating investment, generating jobs and boosting income. At its heart is the sale of multiple state assets. Its infrastructure sector is one of the winners from these initiatives, with inflows of private capital being used to support key concessions and projects in transportation, sanitation and telecoms.

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The Investment Partnerships Programme (PPI), which is chaired by the Ministry of Economy, plays a central role in driving investment in the country’s major infrastructure projects. It acts as an investment hub, facilitating links between key stakeholders including regulatory agencies, embassies, regional governments, domestic and international investors, banks and financial services firms and multilateral organisations. 

According to the World Bank’s Logistics Performance Index for 2018­/19, Brazil ranks 56th out of 160 countries in the quality of its infrastructure.  

“Since 2019, 83 infrastructure assets have been granted to the private sector, ensuring 100bn reais ($21bn) in investments and with 1.2 million jobs set to be created during the course of the contracts,” says Marcelo Sampaio, Brazil’s infrastructure minister.

In what Mr Sampaio describes as “the largest infrastructure assets concession programme in Brazil’s history”, the auctions that have taken place so far include the November 2021 5G auction, which netted $7.7bn; the sixth round of airport concessions in April 2021, which raised $1bn; and the East–West Integration Railway connecting Brazil’s north and north-east regions with more than 1500km of new railway tracks, which raised $988m.

The sale of Brazil’s 5G spectrum in the three main broadcast bands was the second-largest auction of assets in the nation’s history and the largest auction of telecom assets to date in Latin America. According to investment promotion agency Apex-Brasil, the creation of the 5G network is eagerly anticipated in the country as it will allow for greater automation across multiple sectors, from agriculture to healthcare.

Brazil is holding another auction of 5G spectrum licences in 2022, which is expected to generate around $1bn.

Aviation investment takes off

Despite air travel being hugely affected by the pandemic, Brazil held 22 airport auctions in 2021, attracting investment from firms such as France’s Vinci Airports, which won the right to run seven airports in north-east Brazil. Vinci said in March this year that its investment would improve mobility in the Amazon region, modernise airport infrastructure, reduce the carbon footprint of the airports by 50% by 2030 and achieve net-zero emissions by 2050 through energy efficiency measures. The firm said it would also open new routes and add destinations, as well as enhance the passenger experience.

Nicolas Notebaert, president of Vinci Airports and CEO of Vinci Concessions, said in a statement in March 2022: “Here in the Amazon region, where air connectivity is essential, Vinci Airports will look at creating long-term benefits for the mobility of people and the supply chain. We will mobilise an industrial model to unlock airport potential and activate the synergies with Salvador airport that we have been successfully operating since 2018.”

Transport accelerates 

According to the US International Trade Administration, trucks are the primary method of cargo transport in Brazil, which makes logistics more expensive and contributes to the ‘custo Brasil’ concept that high operational expenses are part of the cost of doing business in the country. To address this, transport projects are being initiated to improve links and cut costs.

Investment in the Arco Norte, the corridor of roads, ports and railways in the north of the country, will connect major transit hubs and enable goods to be exported via north and north-eastern ports. This has the potential to cut the number of miles travelled and the costs involved in reaching markets in Europe or China, and other destinations via the Panama Canal.

Another project aimed at reducing distances and cutting costs is the Ferrogrão, a new freight railway line that is nearly 1000km long. Part of a broader series of rail expansion plans, and scheduled for completion in 2030, this scheme aims to connect the agriculture state of Mato Grosso with the northern ports of Pará, creating a transport link for ships bound for Asia.

As investment in Brazil’s transport networks shifts up a gear, the aim is to improve connectivity and cut logistics costs, thus increasing the competitiveness of mineral and grain crop exports, boosting regional economies and services, and creating jobs. 

However, concerns have been raised by environmental groups that carving out new transport corridors could also increase deforestation and put pressure on indigenous and local populations.  

For example, the Forest Declaration Platform, which was set up to support stakeholders to take action on forest pledges, says in its 2020 ‘Balancing forests and development — addressing infrastructure and extractive industries, promoting sustainable livelihoods’ report that a review of proposed road construction projects in Brazil and other Latin American countries found that most lacked a rigorous environmental and social impact assessment.  

Sanitation services

Investment opportunities are emerging in Brazil’s sanitation infrastructure. The World Bank reports that despite the progress made over the past decades, Brazil still faces persistent deficits in access to water supply and sanitation services with important environmental, social and economic negative impacts. 

To address some of these challenges, more than 10 auctions are scheduled for 2022. These include the privatisation of water utility Corsan in the state of Rio Grande do Sul and the creation of a wastewater public–private partnership in the state of Ceará.

Project pipeline

Auctions for 142 Brazilian state assets have been earmarked for 2022. “There will be new opportunities for investors this year, with the prospect of contracting another 100bn reais,” says Mr Sampaio. “In the port sector, auctions are scheduled for the leasing of 19 port terminals and the Paranaguá Canal, in addition to the privatisation of the ports of São Sebastião, Itajaí and Santos, which is the main project. The auction of the seventh round of airport concessions is expected to ensure 7.3bn reais in private investment with the concession of 15 airports in three blocks, including Congonhas in São Paulo.”

Mr Sampaio says that when it comes to roads, the auction of the highway between Rio de Janeiro and Governador Valadares will be one of the highlights. “Also planned is the main road link between Rio de Janeiro and Belo Horizonte, and the Paraná ring road, with more than 50bn reais in investment,” he adds.

He says private investment in Brazil’s infrastructure is crucial. “The public sector has fiscal restrictions that have worsened with the global recession caused by the Covid-19 pandemic,” he explains. “Thus, the search for private investment, whether domestic or foreign, is essential, not only for the resumption of economic growth in the coming years, but also to improve the country’s infrastructure. For this reason, the Ministry of Infrastructure has developed incentives to stimulate competition for assets, offering innovative projects in all modes of transport, with important advances in funding sources, new contract models and sustainable practices.”

In association with Apex-Brasil. Writing and editing were carried out independently by fDi Intelligence.