Brazil’s Economy Held Back By Primitive Infrastructure The Latin American giant is doing poorly on account of its lack of modern roads and ports

By Paolo von Schirach

August 20, 2013

WASHINGTON – Until not too long ago, we were told that the smart investors should focus on the BRICS, (Brazil, Russia, India, China and South Africa). The consensus was that the major Western economies were exhausted: to much debt, and no more creative juices, while the super sized middle-income emerging economies were really revving up.

A lot of hype about the BRICS

Well, that prediction turned to be hype. Within the BRICS, only China is still doing alright. However, now we get signs that the Beijing leadership will have to deal with complex, perhaps intractable, major issues ranging from environmental ruin to higher labor costs that have eroded China’s competitiveness and a more restless middle class demanding accountability.

As for the others, once the China-induced commodity prices boom ended, they are back to where they were: struggling, unimpressive emerging countries, held back by inefficient public services, bloated bureaucracies, corruption, and bad infrastructure.

Infrastructure is critical

For example, there was a major report on Brazil’s antiquated infrastructure in the FT, (Brazil fills potholes in attempt to lift growth, August 19, 2013).  According to the FT detailed story, the picture is really scary. Only 16% of Brazil’s roads are paved, while about 58% of all goods are moved by truck. Long and expensive journeys mean higher prices for almost everything. For instance, Brazil moves 82% of its soybeans by truck, compared with only 25% in the US. On account of bad roads causing longer trips it costs an additional US $ 145 per tonne to deliver Brazilian soybeans from farm to port, six times what it costs in the US. (And, mind you, all American experts decry almost daily the very poor state of American infrastructure, on account of underinvestment over many decades).

Bad ports, limited mass transit systems

And Brazil ports are also in need of serious modernization. The same FT story indicates that, according to MAERSK, the shipping global giant, ” It takes a container 21 days to clear Brazil’s main port, Santos, compared with only two days for Rotterdam“. And it goes on and on. Sao Paulo has one and half times the population of London and yet its metro system is only 1/6 the size. Just imagine rush hour in Sao Paulo’s super congested roads. What fun.

So, you get the picture. Unpaved or poorly maintained roads cause huge delays, this way causing higher prices for all transported goods. On top of that, because of bad roads, driving in Brazil is a recognized as a major hazard, with traffic accidents ranking as the second highest cause of death by injury in Brazil. Add to that bad port infrastructure and totally inadequate mass transit in mega-cities like Sao Paulo.

All modern countries have modern infrastructure

Clearly these huge inadequacies can be dealt with. But this would require a major multi-year investment program. The Brazilians are discussing it. And may be something will be done. And yet, it is unclear why they had to wait this long. Every economist will tell you that there is no such thing as a modern, efficient country with poor infrastructure.

May be the Brazilian leaders were not told this?



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