Roads, ports shape up as key Brazil vote battle

By Stuart Grudgings – Analysis

RIO DE JANEIRO (BestGrowthStock) – Farmers in Brazil’s northeast grow a bumper soy crop but lose millions of tons because the only nearby port cannot cope with the loads.

In the same region, children spend their days filling in potholes in roads and charging motorists for the favor. In the financial capital Sao Paulo, commuters endure hours of hellish traffic each day as they inch to and from work.

For all of Brazil’s progress toward developed status in recent years, much of its road, port and rail system would not be out of place in the Third World — a discrepancy that will be a key battleground in October’s presidential election.

Barely a day goes by without government candidate Dilma Rousseff posing for cameras with outgoing President Luiz Inacio Lula da Silva at ceremonies to open or lay the first stone for new public works around the vast country.

Lula, who cannot run for a third term, anointed Rousseff, his chief of staff, the “Mother of the PAC,” the acronym of his $286 billion flagship infrastructure program, making clear he sees it as a key campaign strength for her.

But the opposition, which faces a tough battle given Lula’s high popularity ratings, sees an Achilles’ heel in the government’s infrastructure record. It points to hefty delays and bottlenecks in the spending that has seen only 63 percent of the funds allocated and only 40 percent of the projects completed since 2007.

The opposition also accuses Lula of using the PAC as a propaganda machine to boost Rousseff’s national profile.

“The roads are potholed, the airports are on the verge of seizing up, the transport infrastructure such as ports was delivered to politicians and pressure groups,” Sergio Guerra, the Senate leader of the main opposition PSDB party, said in an interview in Veja magazine.

“This is the reality of PAC and we will end it.”

BUREAUCRACY TO BLAME

Sao Paulo state Governor Jose Serra, the centrist PSDB’s likely candidate, wants to improve the government’s capacity to invest by increasing efficiency and lowering Brazil’s lofty interest rates.

Rousseff, a former leftist militant who is catching Serra in opinion polls, favors a bigger state role but has also pledged to reform the often rigid federal bureaucracy.

“It will be intelligent for the opposition to go after the quality of the investments, the efficiency of the investments, because they are clearly not good,” said Joao Pedro Ribeiro, a political analyst at Tendencias consultancy in Sao Paulo.

As well as making Brazilians’ lives harder, transport bottlenecks prevent the emerging giant from achieving an economic growth rate to justify growing investor enthusiasm.

Despite a period of prosperity under Lula, Brazil’s economy has fallen short of the annual growth rates of 6 percent and higher that have been achieved by India and China.

The rail network in Brazil, the world’s biggest exporter of beef, coffee, sugar and soy, has expanded little since the 1980s with a total length of about 19,000 miles, less than a tenth of the United States. That puts most of the strain on the poorly maintained and clogged road network.

A stark example of the costs came in February when the Agriculture Ministry estimated that farmers in the northeast had lost 3 million tons of a record soy crop because of a lack of capacity at the main port in Maranhao state.

Depending on the time of the year, the cost to farmers in central Mato Grosso state of getting soy to ports could be the same as the price they get paid, said Lawrence Pih, the chief executive of major flour mill Moinho Pacific.

“Farmers could obviously have a much better return if infrastructure and logistics were more efficient,” he said.

“This government has come a long way from past governments, because nobody ever took these logistical problems seriously.”

THROWING NUMBERS

Standard and Poor’s ratings agency said last month that Brazil would have to spend up to $500 billion in the next five years as it fills infrastructure gaps and prepares to host the 2014 soccer World Cup and the 2016 Olympic Games.

It urged Brazil to make more use of private financing for public works, warning that the funding of public loans could raise its debt burden and its fiscal vulnerability.

Much of the blame for Brazil’s infrastructure problems lies with a slow-moving, inefficient federal bureaucracy that Lula and his ruling Workers’ Party (PT) have made little headway in reforming and which holds projects up in a maze of licensing.

“There are no incentives, you don’t have performance evaluation, people don’t get fired … managers don’t get fired — it’s a disaster,” said Amaury de Souza, a senior partner at MCM Associates, an economic and political consultancy.

“This was promoted over years by the PT and the left in general. Lula is now facing his own poison.”

Brazil’s lagging infrastructure despite seven years of strong economic growth under Lula should be a boon for the opposition in the campaign that starts officially in July.

But the average voter could be forgiven for thinking that new roads, bridges and hospitals are springing up almost every day. Lula, with Rousseff in tow, has inaugurated 21 projects this year, according to the Estado de Sao Paulo newspaper, although many of them remain far from completion.

“I think the government has the upper hand at the moment,” said Ribeiro. “You get to a point where both candidates are throwing numbers on TV and the electorate has no idea of knowing what numbers are real.”

Investment Analysis

(Editing by Todd Benson and Mohammad Zargham)

Roads, ports shape up as key Brazil vote battle