New opportunities on track
China has cooperated with Brazil for years, and they have both benefited. But Brazil has been mired in recession for some time now, and China is faltering. The South American country nevertheless plans to develop its infrastructure in grand style.
The world’s major economic powers have long had their sights on Brazil, a country rich in raw materials: oil, uranium, rare earths, tin, platinum, phosphates, nickel, iron ore, manganese, gold and bauxite are just some of the natural riches the country has to offer.
China is interested in these raw materials, and companies from the Far East have thus already been investing in Brazil for years by now. The Brazilian economy is currently in recession, however; and what is more, its dependence on raw materials has also proven to be a curse, in particular on account of the recent commodity prices collapse in markets for goods such as oil. To make matters worse, the country is experiencing the biggest corruption scandal in its history, centred on the energy company Petrobras, which has shaken confidence in the economy.
One problem is that for a long time Brazil did not attend to matters such as efficiency, or the quality of its infrastructure. Added to that is long-standing high demand for commodities from China. But now the Middle Kingdom is struggling with an economic crisis of its own, and demand is dropping off.
Major investment programme
According to the World Bank’s Logistics Performance Index for 2016, the quality of Brazil’s logistics systems places it 55th out of 160 countries. In a transport handbook for 2016, published by the Confederação Nacional do Transporte (CNT, a coalition of around 20,000 Brazilian transport enterprises), the authors conclude that around 43% of the 100,763 km of the country’s A roads are in good condition; 35% were classified as normal, and 22% as very bad. The transport association is courting Chinese investors and in support of that effort opened an office in Beijing in 2013.
In 2012 Brazil initiated a logistics investment programme that has been continued by successor governments. The plan provides for the establishment of a public-private partnership model to finance and invest around EUR 56 billion over the next 30 years. Under the scheme, four airports will receive EUR 2.4 billion, the railways will get EUR 24.5 billion, EUR 10.5 billion will go to ports, and EUR 18.6 billion towards A roads. Around a third of this is set to be invested by 2018. The investment programme has been designed to improve the integration between the various modes of transport. In addition, a toll system will be introduced for the country’s high-speed motorway network outside of major cities. Funding will be provided through a public-private partnership, and the concomitant concessions will be awarded for a period of 30 years.
In the meantime, the railway sector also offers an alternative to the roads. In 2012 the government decided to build 11,000 km of tracks by 2025, of which 5,000 km have already been laid. The railfreight field has been earmarked for revitalisation too. Currently, the centre of attention is a 572 km link between Rio de Janeiro and Victoria, which focuses on ports in the states of Rio de Janeiro and Espirito Santo.
So far, the country’s port authorities have held back, investing just 28.6% (EUR 835 million) of their total budget for the 2000–2014 period. Although the county has changed its ports legislation, the move failed to attract enough investors to mobilise the desired EUR 6.5 billion for construction and modernisation. There has nevertheless been some initial success, with the China Communications Construction Co (CCCC) investing EUR 420 million in a WTorre Group terminal in the region of São Luís in the northern state of Maranhão.