Brazil Infrastructure Report Q2 2009

Brazil Infrastructure Report Q2 2009

Brazil’s construction industry has been hit by the global downturn. However, the government, through its
ongoing growth acceleration programme, is working to support infrastructure investments. As a result, in
BMI’s Q209 Brazil Infrastructure Report we believe that there will be growth in the value of the
construction industry in 2009, of 2.49% year-on-year (y-o-y), reaching a value of BRL139bn.
So far in 2009 there has been activity in the various construction subsectors, much of which is supported
by the Programa de Aceleração do Crescimento (PAC), the government’s growth acceleration plan . In
the transport sector, the government announced a US$2bn upgrade for the Port of Santos. A number of
road and rail concessions were launched, and in January, the RodoBahia consortium, including Spain’s
Isolux Corsan, was awarded a US$868mn 25-year highway concession in Bahia state, including
upgrading 550km of highways.
The power sector has also seen significant developments. The Angra III nuclear power plant (NPP),
which has been in the pipeline for over two decades, was given environmental approval in March 2009.
The NPP, which is being developed by Eletronuclear, will boost Brazil’s nuclear power capacity by
1,400MW when it is completed in 2014. The Belo Monte 11.2GW, US$4.1bn hydropower plant is also
moving along with Eletrobrás submitting the environmental impact study in March 2009. Work is also
due to start on the Jirau hydropower plant, with the Brazilian Development Bank awarding GDF Suez
and its partners a US$3.1bn loan for the project.
In the construction sector, the government approved US$152bn for the construction of low income
housing over the next 15 years. Commercial and tourism construction is also set to get a boost from
preparations for the 2014 World Cup, which ABDIB estimates will cost US$43bn in preparation costs..
However, Brazil’s construction industry in general is expected to take a hit over 2009. This is due to
falling private sector investment due to difficulties in financing projects and risk aversion in the markets
in general. In addition, the declining macroeconomic climate (real GDP contraction of 0.6% forecast in
2009), due to falling demand for Brazil’s key revenue source (exports), will impact demand for
construction. Indeed, in February 2009 it was announced that at least BRL10bn (US$4.5bn) of investment
into private infrastructure projects had been delayed or cancelled since September 2008.
Currently the sector is being propped up by the PAC, the government’s growth acceleration programme
which – including a boost allocated in February 2009 – envisages BRL642bn invested in infrastructure
projects between 2007 and 2010.
BMI notes that the PAC is one of the key elements maintaining Brazil's construction industry real growth
at a positive level, especially in light of the value of cancelled and delayed projects from the private
sector. The government has repeatedly noted that investments under the programme are safe, and has
stated that 83% of the projects currently being developed under the PAC were running on schedule. In
addition, the government announced that public investment in infrastructure increased by 50% y-o-y in
2008 compared to 2007, reaching US$4.92bn, as reported by Dow Jones Newswires.

Executive Summary 5
Market Overview 7
Brazil 7
Global Overview 8
Industry News - Weeding Out Possible White Elephants 8
Mega-Urban Regions: Opportunities And Challenges For Infrastructure 9
Mega-Urban Regions: Investment Opportunities And Risks 10
Table: The World's 30 Largest Urban Agglomerations 12
Table: The World's Richest Cities In 2020 By Gdp 16
Table: The World's Fastest Growing Urban Areas 18
SWOT Analysis 20
Infrastructure Industry SWOT 20
Infrastructure SWOT 20
Brazil Political SWOT 21
Brazil Economic SWOT 22
Brazil Business Environment SWOT 23
Major Infrastructure Developments And Key Projects 24
Transport Infrastructure Overview 24
Airports 24
Roads 24
Ports 25
Rail 25
New And Ongoing Projects 27
Airports 27
Ports And Waterways 28
Road Networks 31
Rail Networks 34
Table: Brazil Major Infrastructure Projects - Transport 37
Energy And Utilities Infrastructure Overview 40
New And Ongoing Projects 42
Power Plants And Transmission Grids 42
Pipelines 45
Water 46
Table: Brazil Major Projects - Utilities 49
Construction Overview 51
New And Ongoing Projects 52
Residential Construction 52
Commercial Construction 53
Industrial Construction 53
Table: Brazil Major Infrastructure Projects - Construction 54
Table: Economic and Construction Data 55
Business Environment 58
Regional Overview – Latin America 58
Table: Americas Infrastructure Business Environment Ratings 61
Limits Of Potential Returns 62
Risks To Realisation Of Potential Returns 62
Project Finance Ratings: Outlook For Americas 63
Table: Design And Construction Rating 65
Table: Commissioning And Operating Rating 66
Table: Overall Project Finance Rating 68
Foreign Direct Investment 68
Labour Force 69
Legal Framework 70
Tax Regime 70
Macroeconomic Outlook 72
Political Outlook 74
Table: Brazil: Political Overview 75
Company Monitor 77
Grupo Camargo Corrêa 77
Construtora Norberto Odebrecht 80
Centrais Eletricas Brasileiras SA (Eletrobrás) 82
Country Snapshot: Brazil Demographic Data 85
Section 1: Population 85
Table: Demographic Indicators, 2005-2030 85
Table: Rural/Urban Breakdown, 2005-2030 86
Section 2: Education And Healthcare 86
Table: Education, 2000-2003 86
Table: Vital Statistics, 2005-2030 86
Section 3: Labour Market And Spending Power 87
Table: Employment Indicators, 1999-2004 87
Table: Consumer Expenditure, 2000-2012 (US$) 87
Table: Average Annual Wages, 1996-2002 88
BMI Forecast Modelling 89
How We Generate Our Industry Forecasts 89
Construction Industry 90
Sources 90
Business Environment Ratings 90
Ratings Overview 91
Table: Infrastructure Business Environment Indicators 92
Project Finance Ratings Methodology 93
Operating Risks –Construction Risks 94
Operating Risks – Commercial Construction 95
Operating Risks – Energy and Utilities 96
Operating Risks –Transport 97