Tenders boost investments in infrastructure in Brazil, but they are half of the ideal

Investments in infrastructure accounted for a significant increase in Brazil’s GDP (Gross Domestic Product) this year, according to a study on the impacts of tenders carried out in recent years.

The survey by Infra2038, an institute created five years ago by the Lemann Foundation, pointed out that only the BRL 173.6 billion committed through bids carried out at B3 this year will have a positive impact of about 0.5 percentage points on economic growth of the country of 2022.

The R$ 186.9 billion that should be contracted in auctions next year will have an impact of around 0.6 points of growth, considering both direct and indirect effects. As a result, investment in infrastructure, which had been 1.58% of GDP in 2021, should reach 1.87% this year, rising next year to 1.91% of GDP.

According to Frederico Turolla and Gabriel Fiuza, authors of the study, this evolution reflects advances in the executive and legislative spheres to improve the regulatory apparatus for concessions, which has given investors more confidence.

Concessions held in recent years at B3 included the sixth and seventh rounds of airport auctions, Via Dutra and Fiol (West-East Integration Railway).

According to the study, in values ​​updated by the IGP-DI, the auctions held in the last ten years on B3 moved about R$ 418 billion.

Despite the recent acceleration, the contracted amount of investments in bids is far from the levels observed at the beginning of the century, when it surpassed 3% of GDP between 2000 and 2001.

“For a country with the characteristics of Brazil, investments in infrastructure should be twice as much”, said Turolla, a partner at consultancy Pezco Economics.

According to the survey, the bids indicate some persistence of investments in the medium and long term, even with the typical concentration of contributions in the first two years of the contract. In the accounts of the PPI (Investment Partnerships Program), linked to the Ministry of Economy, auctions held since 2019 have contracted total investments of BRL 900 billion.

The study’s revelations come at a time when market agents are questioning the future of the infrastructure concessions agenda in the country amidst the transition from the government of Jair Bolsonaro to that of Luiz Inácio Lula da Silva, who takes office in 2023. Lula signaled this week that there will be no privatizations in his government, but he gave no indications about the concessions agenda.

In this sense, among the agents’ points of attention, according to the authors of the study, is the BNDES, which in recent years has taken on a greater role of structuring projects than of lending subsidized resources, as happened in the PT governments between 2003 and 2016.

This week, Lula appointed economist Aloizio Mercadante, a former PT staff member, to head the development bank, which had a negative impact on the market.

According to Fiuza, who recently served as deputy secretary of the Secretariat for Infrastructure at the Ministry of Economy, another factor that helped speed up the bidding process was the centralized coordination of projects in a single ministry.

Lula has already signaled that he intends to resume the previous model in which the economic attributions of his government will be divided between the Ministries of Finance and Planning.

Despite the current more adverse macroeconomic conditions in Brazil and in the world, the study also points out that in some sectors of the economy, tenders should continue to accelerate, such as renewable energy and sanitation, with a large participation of states and municipalities.