Private investment in infrastructure is the highest in 20 years, while the public sector is sluggish

Private investments in infrastructure in Brazil reached record levels in 2022, while the performance of the public sector remains below that seen in the middle of the last decade.

According to the Infrastructure Blue Book, released this Wednesday (30th) by the industry association Abdib, private sector investments in the area in Brazil reached R$ 131 billion this year, the highest in the series started in 2003, in updated values.

The public sector, considering all spheres, invested BRL 31.9 billion, the second worst result since 2006, behind only the BRL 29 billion in 2021.

Total investment reached the highest level in seven years, but is still 21% below the record seen in 2014.

Resources for infrastructure are currently around 1.7% of GDP (Gross Domestic Product), against a need of around 4.3% of GDP, around R$ 230 billion a year, according to the entity’s estimate.

Roberto Guimarães, director of Planning and Economy at Abdib, says that, currently, there are 432 projects and initiatives in the country that could generate investments of R$ 544 billion. Of this total, 179 projects are already being launched and could inject R$ 173 billion into the economy over the next five years.

“They are insufficient for what Brazil needs, but they are already a good path”, says Guimarães.

He says that the country cannot rely solely on private money in this area, as many projects are not financially viable, such as the maintenance of several highways across the country.

“In the last two years, private investment has recovered well, but public investment is very low. We should have both growing, one complementing the other.”

Since 2014, private investment has grown 4.3% in real terms (inflation discounted), while public investment has retreated 61%, in the face of fiscal restrictions, such as the spending cap rule.

The biggest bottlenecks are currently in transport and logistics and basic sanitation, while the energy and telecommunications segments are closer to the necessary level.

In transport, there is a need to invest 2.26% of GDP annually, but investment reached 0.35% in 2021, combining public and private investments. In basic sanitation, it is necessary to invest 0.45% of GDP per year, says the entity, but the amount invested added up to only 0.20%.

According to the Blue Book, Brazil has an infrastructure stock in relation to GDP of around 34%, while economies such as India and China are at the level of 58% and 76% of GDP, respectively.

Guimarães cites the issue of highways as an example. Brazil has a network of 1.7 million kilometers, slightly larger than that of Japan (1.2 million) —a much smaller country—, and smaller than the 6 million of the USA, which is also a country of continental size. .

The entity points out that, in view of fiscal restrictions, practically all states and several municipalities now have a partnership and concession program to attract the private sector. In the current government, 172 federal auctions were carried out, generating R$ 179 billion in grants and expectations of more than R$ 922 billion in investments in the coming years.

Abdib also highlights the regulatory reforms approved by the National Congress to provide more stability, legal security and attractiveness to private capital in various sectors, such as basic sanitation, natural gas, cargo transportation by various modes and telecommunications.