Brazil’s Lula reveals $200bn infrastructure plan

Brazilian President Luiz Inácio Lula da Silva has introduced a plan to invest 1 trillion reais (approximately $200 billion) in infrastructure, energy, and transportation over the next four years as part of a broader strategy to stimulate economic growth and employment in Latin America’s largest nation.

The Growth Acceleration Program, also known as PAC in Portuguese, has faced skepticism from analysts and investors. Previous ambitious programs have included projects that were never realised and were linked to significant corruption scandals.

The allocated funding for this year’s PAC is expected to support various infrastructure endeavours, including new highways, ports, energy efficiency initiatives, and urbanisation projects in slums.

Lula emphasised that the new PAC is a collaborative commitment, resulting from discussions with governors, mayors, and representatives from the private sector. The goal is to ensure that the chosen projects address the unique needs of different regions across the country.

While the government hasn’t detailed the funding sources for the nearly $200 billion, the final budget proposal is due to be sent to Congress by August 31. The plan will require approval from Congress and subsequent inclusion in the annual budget by December.

The original PAC was launched by Lula in 2007 during his second presidential term. It included investments in infrastructure, affordable housing, highways, and improved access to bank loans.

Lula’s administration supports the new plan, asserting that public investment is necessary for economic growth. Finance Minister Fernando Haddad labeled the past ten years in Brazil as a “tragic decade” due to sluggish growth and expressed the need for higher economic expansion.

Gilberto Braga, a finance professor at Ibmec University in Rio de Janeiro, noted the ambitious nature of the program and its alignment with the government’s political objectives, seeking to establish a legacy of notable achievements for Lula’s third term.

Investors in Brazil have harboured reservations about the fiscal discipline of the left-wing Workers’ Party. Previous PACs have drawn criticism for abandoned or incomplete projects, and concerns persist about the proper allocation of public funds.

Government officials highlight the prioritisation of unfinished infrastructure projects, particularly around slums, which will be a focal point of investment under the PAC. This encompasses initiatives such as affordable housing, sewage improvements, and flood prevention.

Another significant investment area is energy efficiency and transition. While the government emphasises boosting renewable energy and natural resource utilisation, state-controlled oil company Petrobras will receive a substantial portion of energy-related investments.

Despite environmental disputes, Petrobras President Jean Paul Prates affirmed the company’s commitment to energy transition, including biodiesel production.

The Brazilian government estimates that including private sector-led initiatives and public-private partnerships, the total investments over the next four years could reach 1.7 trillion reais (approximately $350 billion), a figure that has captured the attention of investors and analysts.