Nationalization of Infrastructure
The Nationalization of Brazil’s Infrastructure
December 30, 2015
Marc Sirotnik – Primary Article Contributor
Tom Jones – Team Leader and Editor
Keywords: Brazil, Infrastructure, Nationalization, Private Investment, infrastructure development, railways, ports, airports
The liquidation of the state owned RFFSA has fragmented the railways into privately owned organizations and there are now some twenty-two railway companies operating in Brazil. The privatization of railway companies has allowed more effective means of development and the companies do not face as many policy barriers as do railways primarily controlled by the federal government. The FCA is perhaps the most important railway transportation system in Brazil as it is the largest and covers the most territory. Owned and funded by the private corporation VLI (Valor da Logistica Integrada), the FCA owns 500 locomotives, 12,000 wagons and enjoys a private investment of around US 46$ million. It is the primary shipping method used to transport resources such as soy, lime, cement, iron and ethanol throughout Brazil.
In terms of public transportation, the state primarily controls this sector. Public transportation includes streetcars, Metro’s, and high speed railways. Because of the nationalization of public transit, there is almost no private investment in the sector, poor allocation of resources, extremely high costs during peak hours, and misuse of funds. Only under Dilma Rousseff have attempts been made to privatize public transportation, a process that is ongoing.
Overall, the situation of Brazil’s railway system is quite disorganized as the state controls much of the public transportation railway systems, while private investors and private companies have gained the majority of control in industrial railway systems. As an investor, it would be wise to invest in private corporations such as VLI due to its overarching importance in not only railway transportation, but also ports and terminals. VLI is a private logistics company that connects privately owned railway (and port) systems together in order to centralize administration, policies, and funds. This method is effective as the mobilization and allocation of resources are not subject to independent policies of other private companies and federal-controlled companies. In order to improve the current condition of the infrastructure in Brazil moving forward, supporting companies such as VLI is highly recommended.
Ports in Brazil are also in need of revitalization and improvement. There are thirty-four public ports in Brazil, sixteen of which are directly controlled by state or municipal governments. Private companies control the remaining eighteen, however, their largest stakeholder is the Federal government. So, no port in Brazil is completely privatized and exempt from governmental control and influence. The conditions of the ports are not good as there are many sanitary issues, long delays due to overcrowding, and the structural components of ports hinder the ability to import and export resources effectively. Under the presidency of Dilma Rousseff, there have been attempts to privatize ports through auctions, and some auctions have been successful. Only time will tell if privatization of ports will be successful, however initially some ports have begun to enjoy the benefits of privatization such as the Port of Salvador. This port had the reputation as being the worst port in Brazil. Since privatization, capacity has doubled, equipment has been modernized, and their channels have been deepened to allow much larger ships to enter the port. This shows the Brazilian government that continued privatization will continue development.
Brazilian airports are entirely government operated under federal jurisdiction. Run by Empresa Brasileira de Infraestrutura Aeroportuária, or Infraero, there are now sixty airports under their direct administrative control. Airports in Brazil have many private investors, but the allocation of funds, policymaking, and developmental decisions are largely made by the state. In order to expand and cultivate growth, the government has asked major international airport operators such as BAA, Aeroports de Paris and Fraport to invest in their airports and undertake some administrative responsibilities, but each of these companies has declined the offer if Infraero held the majority of decision-making powers. Therefore privatization in this sector is unlikely in the near future.
