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June 1, 2015

Brazil Identifies R$ 195 Billion in needed Infrastructure Projects

A recent study released in Brazil identifies 250 essential infrastructure projects that are needed to improve Brazil's infrastructure. The title of the report produced by the National Transportation Confederation (CNT) is: Transportation and Development - Barriers to the Movement of Soybeans and Corn in Brazil. To identify the projects, CNT conducted interviews with representatives from the transportation and agriculture sectors involving the condition of the nation's highways, railroads, barges, and ports.

Funding for the 250 "wish list" of projects would require R$ 195 billion reals with the railroads being the most expensive. In the railroad sector they identified 67 projects at a cost of R$ 80 billion. For highways, there are 48 projects costing R$ 60.5 billion. They identified 46 navigation projects needed to take advantage of Brazil's river system to transport grain at a cost of R$ 34 billion. Lastly, the report detailed 75 projects that are needed at Brazil's ports at a cost of R$ 18.8 billion.

Improving Brazil's highway system would be the quickest and most cost effective way of reducing transportation costs. The condition of Brazil's highways, which transports 65% of the nation's soybeans, is considered poor to very poor. The poor state of the highway system adds an estimated 30% to the cost of transport due to increased operational costs, higher repair costs, and slower travel times. The study estimated that the poor quality of the road system in Brazil adds US$ 3.8 billion to the cost of transporting agricultural products in Brazil or the equivalent of 4 million tons of soybeans or 24% of the government's investment in transportation infrastructure in 2014.

Brazil has 1.7 million kilometers of roads, but only 213,000 kilometers are paved (12.4% of the total), which is 18 times less in the density of paved roads compared to the U.S. In the latest World Economic Forum ranking of the national highway systems, Brazil ranked 122 compared to a ranking of 16 for the United States and 110 for Argentina.

The report also cited that increasing the amount of grain transported by barge is urgently needed in Brazil. Only half of the 41,000 kilometers of navigable rivers in Brazil are being utilized for transportation and the level of usage is very small.

These 250 projects would benefit not just agriculture, but all segments of the Brazilian economy. The problem of course is finding the needed funds for these projects. Currently, Brazil is mired in a recession with increasing unemployment and rising inflation. After overspending for the 2014 World Cup and for the 2016 Olympics, the federal government is now slashing spending in all sectors including infrastructure spending. The Brazilian government is attempting to fund some of these projects through public/private partnerships, but progress has been uneven.