Brazil: Planned Infrastructure Upgrades and Expansion Essential
The widening Petrobras “Lava Jato” (car wash) scandal continues to radically impact business in Brazil. Not only has this put a major dampener on petrochemical projects, but it has also had a nationwide impact upon the economic, political and business landscape.
The backlash has been widespread, impacting Petrobras itself, the contractors who were allegedly involved and, more importantly, the Brazilian government. Recent polls show President Dilma enjoys less than 10% support, a 20 year low. Combined with a general slowdown in the Brazilian economy, this has brought an almost perfect storm of financial turmoil for the country, the result has included rising unemployment, businesses closures and major projects either suspended, cancelled or under investigation.
Coupled with the potential fall out of the FIFA corruption scandals and the protests prior to the 2014 World cup, for which the ruling PT party took considerable public blame, the government is now, more than ever, being pressured to take urgent action to clean its own house and kick-start the spluttering economy. And in a country the size of Europe, one of the key issues is poor infrastructure, crippled by crumbling roads and rail networks.
Transportation of materials, goods and people around the country has always been one of the major stumbling blocks for infrastructure investment in Brazil, with extremely high costs and risks. Delayed, damaged or lost shipments are a considerable issue and these problems are often compounded by the federal state structure and the related taxation complications, where routing an expensive piece of equipment can impact the project tax bill by many thousands of dollars. Poor infrastructure also impacts the movement of labor, and the need to navigate long distances to remote projects - with poor roads and no rail access - has a major impact on projects. This is further complicated by the high cost of air transport.