OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

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Promoting Infrastructure Development in Brazil

Brazil under-invested in infrastructure for over three decades, and infrastructure investment rates have come up only slowly since 2007. Infrastructure needs are sizeable in almost all sectors. It is likely that at its current stage of development the country will benefit from large pay-offs from infrastructure spending. Against this background, the Brazilian authorities have put in place a large infrastructure plan named Growth Acceleration Programme (Programa de aceleração do crescimento, PAC). This programme has been rightly protected from the fiscal cuts announced in early 2011. Nevertheless, some changes to the policy and regulatory framework could be introduced to make public investment more cost-efficient and to foster private participation. In particular: • The second stage of PAC needs to focus on completing the most worthwhile programmes. In addition, the public-private partnership framework should be streamlined. • In most areas, the regulatory framework is working well, but sectors are at different stages of development. Despite important institutional changes in recent years, policy capture is sometimes still influencing some federal and many state regulatory agency decisions. • In spite of some recent progress, frequent disputes appear to delay some infrastructure projects, especially in the energy sector. The main challenge in this area is to hasten the licensing process, while continuing to put appropriate emphasis on environmental and social protection. • Reforms have been implemented in individual network industries, but there is still some room to inject competition in fixed-line telecommunications and to prevent product cross-subsidisation in the electricity sector. Concession contracts in both roads and rail could be refined to foster private investment in maintenance and network expansion. In water and sanitation, where investments are the most needed, smaller municipalities should be encouraged to invest and form consortia to reap economies of scale. This Working Paper relates to the 2011 OECD Economic Review of Brazil 2011 (www.oecd.org/eco/surveys/Brazil).


Keywords: infrastructure, regulatory framework, Brazil, PPPs
JEL: H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts; H54: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock; H43: Public Economics / Publicly Provided Goods / Project Evaluation; Social Discount Rate; K23: Law and Economics / Regulation and Business Law / Regulated Industries and Administrative Law
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