Brazil's 2019 budget outlines low investments

Thursday, December 20, 2018

Brazil's congress approved the federal budget for 2019 on Wednesday, outlining low investments, underscoring the country's great need to attract private sector investors for infrastructure projects.

The congress approved total spending of 3.38tn reais (US$257bn), with 36.2bn reais earmarked for federal government investments, including for infrastructure projects, down from 46.5bn reais projected for 2018. The figure is the lowest on record. By comparison, in 2012, government investment totaled 169bn reais.

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The Brazilian government is still facing the effects of the country's 2015 and 2016 recession, which damaged tax revenues, while government spending continue rising, particularly in salaries and benefits for public servants.

With the low level of public infrastructure investments for 2019, the private sector is likely to play a key role during the tenure of president-elect Jair Bolsonaro, who takes office on January. 1, 2019.

"The government will be obliged to launch concessions and PPPs [public-private partnerships] to attract private sector players for infrastructure projects, as it has no cash," Claudio Frischtak, a prominent economist specialized in the infrastructure sector and head of consultancy group Inter.B, told BNamericas.

He highlighted, however, that the task to attract such investors will be a challenge.

"Bolsonaro's administration has a lot of work to do on the infrastructure side, to improve legal frameworks, facilitate environmental permits and reduce red tape in general, otherwise the investments from the private sector won't appear," he added.

Bolsonaro's government plans to hold a series of auctions during its four-year tenure for concessions for airports, ports and highways, among other projects.