Brazil unveils $66bn stimulus plan

Brazil’s president Dilma Rousseff has launched a R$133bn ($65.6bn) stimulus package to spur investment in the country’s creaking infrastructure and shore up ailing investor confidence in the world’s second-largest emerging market economy.

In the first of what are expected to be a series of announcements in the coming weeks, Ms Rousseff said the government would sell concessions in nine highways and 12 railways before moving onto other areas of infrastructure.

“We are starting with railways and roads but obviously we will take care of airports, ports and waterways,” Ms Rousseff told a gathering of politicians and leading businessmen in Brasília.

Brazil’s economy has slowed to a crawl over the past 12 months as inadequate infrastructure including roads and ports and a shortage of skilled labour has raised costs and stifled industry.

The economy expanded 7.5 per cent in 2010, the fastest pace in more than two decades, but last year slowed to 2.7 per cent and this year is expected to grow 2 per cent or less.

Among the initiatives, the government will sell rights for private companies to operate 7,500km of roads and 10,000km of railways.

The measures would double the capacity of the country’s main highways, transport minister Paulo Passos said at the event.

Of the total investment, R$79.5bn would be spent within five years and the remainder over 25 years. Funding would be largely at favourable terms from the state development bank, BNDES.

Bret Rosen, senior credit strategist for Latin America at Standard Chartered, said the move was a step in the right direction, with infrastructure bottlenecks posing one of the biggest obstacles to faster growth in Brazil.

But he added: “The easy thing is making the announcements, the harder thing is execution, and the track record not just of Brazil but of Latin American countries in general is pretty poor on infrastructure.”

The cost of exporting a container from Brazil is more than double that of China and 1.5 times that of India while the country’s ports are notorious for delays.

But other analysts hailed it as the start of a new era for Brazil. “With a government willing to make politically difficult decisions … this downturn may end up being a boon for Brazil in its quest for global economic status,” Stratfor, the political intelligence agency, said.

The centre-left coalition government led by Ms Rousseff’s Workers’ party has traditionally been opposed to privatizations.

But she has proven pragmatic in the face of infrastructure bottlenecks.

Earlier this year, her government awarded projects to redevelop and operate three major airports to private sector-led consortia in a bid to speed up preparations for the soccer World Cup in 2014 and the Olympics two years later.

“Since last Sunday, we have been an ‘Olympic country’,” Ms Rousseff said on Wednesday. “We are in a countdown to the games in 2016.”

Economists warned, however, that the infrastructure measures announced on Wednesday would have little short-term impact on the economy.

“This is a plus for the long-term but it doesn’t improve the growth prospects in the short-term,” said David Beker, Brazil economist with Bank of America Merrill Lynch.