Sat. Jan 22nd, 2022

Brazil’s successful auction of deep-sea oil prospects last month was seen as a sign of big oil companies’ appetite for crude oil. But for Brazilian officials, the auction was also a watershed moment for the government’s program of infrastructure and natural resources concessions.

A previous attempt to run the complex auction failed in 2019. “Our joy cannot be hidden,” said Bento Albuquerque, Brazil’s Minister of Mines and Energy, who raised the $ 2 billion in cash fees for the government and the further $ 35 billion in investments made by people like Shell and TotalEnergies in the country’s oil and gas sector must be made.

Contrary to the government’s more glorious plans for structural economic reforms, which were thwarted in Congress for years, the program to attract private companies to invest and operate in major infrastructure projects has increased.

Since the start of the Bolsonaro administration in 2019, 131 concessions have been auctioned, generating more than $ 145 billion in investments and $ 26 billion in government fees. In the previous 2.5 years – since the investment program began in 2016 – the figures have been $ 44 billion and $ 8 billion, respectively, in today’s dollars.

And officials predict the expected auction of more than 150 concessions and the generation of $ 70 billion in investments this year as investors, mostly local, put in their money.

It is one of the rare highlights in President Jair Bolsonaro’s economic agenda, which generates billions of much-needed investments in the country’s cracking road, rail, logistics and sanitation systems.

The program is an engine for an economy that has struggled to grow for nearly a decade. Despite a strong setback from the initial impact of the pandemic, many economists predict that Latin America’s largest economy will contract again this year, plagued by the combined impact of rising inflation and interest rates and weak consumer confidence.

“The projects that will be auctioned. . . is already far advanced and we are sure it will be the most intense year in terms of concessions under this administration, ”Infrastructure Minister Tarcísio Gomes de Freitas told the Financial Times.

Among the projects for 2022 are 26 airports, 25 ports, 10 highways and nine national parks and forests. In addition, the government expects to host 10 auctions for mineral rights.

However, independent analysts point out that although Brazil has attracted some international companies – particularly Vinci airports – the investments still come mainly from local players.

“We are on the right track, but we have a long way to go and the pace is slow. We have a problem attracting [new players]. Those who are here are accustomed to all the uncertainties and the government insisting on shooting itself in the foot. But outsiders find it difficult to understand Brazil, “said Cláudio Frischtak, president of Inter’s consultation. B.

“The point is, it’s hard to lure investors if you have a government that has an ideological radicalism that makes no sense to a country like Brazil,” he said, criticizing Bolsonaro’s controversial rhetoric, which often frightened.

Paulo Guedes, Brazil’s finance minister, believes these investments will drive economic growth to as much as 2 percent by 2022, despite the growing threat of double-digit inflation, rising interest rates and persistently high unemployment.

However, economists warn that this year’s election – which is likely to put Bolsonaro against left-wing former president Luiz Inácio Lula da Silva in October – could affect investor sentiment.

“Paulo Guedes puts too much trust in private investment,” said Mauricio Molon, chief economist at Logus Capital in São Paulo. “The business community and market sentiment do not trust Lula or Bolsonaro. It will put a large amount of investment in the wheels. ”

Martha Seillier, the government’s special secretary for the Investment Partnership Program, said its success to date was due to the “structuring of the projects” and a more investor-friendly approach in a nation historically torn apart by bureaucracy.

This is in contrast to the government’s failure to implement its main economic reforms, including a simplification of Brazil’s Byzantine tax system and an administrative reform of the state. “Paulo Guedes needs to demonstrate to the market that they are acting, they are doing something and that the government is not done, but that is not the feeling we have,” said Carlos Melo, a political scientist at Insper. “The feeling is: what more can you really expect from the Bolsonaro government?”

Additional Reporting By Carolina Ingizza

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