Lula: Growth will be correct, fast and sustainable. — AFP
RIO DE JANERIO: President Luiz Inacio Lula da Silva rolled out a US$350bil infrastructure investment plan designed to boost Brazil’s economy and kickstart a green transition.
The leftist leader, who returned to Brazil’s top office in January promising to restore economic prosperity and prioritise sustainable development, touted the plan as a centrepiece of his presidency.
“My third term as president starts today,” Lula, who previously led Brazil from 2003 to 2010, said during an event to launch the programme in Rio de Janeiro. “Growth will be correct, fast and sustainable.”
The government estimates the plan will create four million jobs, and aims to make most of its investments – US$264bil – by the end of his term in 2026, although it did not say how much of that total would come from public funds.
Lula’s allies have painted the initiative as a Brazilian version of President Joe Biden’s efforts to stimulate the United States economy with roughly US$1 trillion in new infrastructure projects and clean energy initiatives.
The proposal carries the same name of a plan Lula created in 2007 – Growth Acceleration Plan, or PAC. This time, however, the government says it will place more focus on greener development alongside traditional infrastructure investments.
It will rely on a mix of federal funds, concessions and public-private partnerships to help finance a combination of transportation, sanitation and ecological transition projects. About US$220bil will come from public funds, with the private sector kicking in an additional US$125bil, according to an official statement.
Energy transition projects will receive a total of US$110bil.
Despite its scope, the PAC will not prevent the government from zeroing Brazil’s budget deficit in 2024 as it has promised, finance minister Fernando Haddad said. All of the plan’s public investments will fit within spending limits set by a new fiscal framework that Brazil’s congress is currently finalising.
Elements of the plan, Haddad said in Rio, are part of a larger effort to begin an “ecological transformation” of Brazil’s economy that will also include new regulations for carbon markets and the issuance of green bonds.
The government is preparing to hold the country’s first-ever sustainable bond sale later this year.
The suite of proposals will make Brazil more attractive to investors while also helping Lula deliver on pledges to combat poverty, Haddad said.
“Our plan cannot and will not be the same as those of developed countries,” he said.
“The profile of emissions is different, which justifies a different strategy. And the challenge of overcoming poverty in a country still marked by profound social inequality is just as important as the environmental challenge.”
Lula has sought to strike a balance between economic development and his green agenda early in his presidency, especially amid a standoff between his top environmental agency and Brazil’s state-controlled oil company, Petroleo Brasileiro SA, over its exploration plans in an ecologically sensitive offshore region.
The PAC proposal also includes financing for the Ferrograo railway, a project that would transport grain through part of the Amazon rainforest region and was suspended over environmental concerns. Brazil’s Supreme Court earlier this year allowed technical studies of the project to resume.
But environment minister Marina Silva, who criticised the previous PAC programme over its lack of concern for the environment, praised the design of the new version.
“Being able to see development and sustainability within the same plan is an unimaginable gain,” she said during the launch event.
Petrobras, as the state-run oil giant is known, will contribute US$66bil to the programme, chief executive officer Jean Paul Prates said. The company, which played a prominent role in the original PAC, has a US$78bil, five-year strategic plan and is mulling an increase for the period between 2024 and 2028. It plans to earmark as much as 15% of its total investments for low-carbon projects.
The New Development Bank – an institution created by the Brazil, Russia, India, China bloc of emerging market nations that includes Brazil – will contribute US$2.7bil in financing for sustainable projects, said Aloizio Mercadante, the head of Brazil’s national development bank.
The previous Growth Acceleration Plan helped increase public investment and led to the construction of hundreds of highways, bridges, hydroelectric dams and other projects under Lula and his successor, former president Dilma Rousseff.
But many of those projects, which were handled by large local infrastructure companies, later faced investigations over corruption allegations.
The programme helped lead to the rise of Operation Car Wash, the years-long corruption probe that put hundreds of business and political leaders – including Lula, temporarily – behind bars.
The PAC programme also financed the construction of oil refineries, like a major petrochemical complex in Rio de Janeiro, and the Belo Monte dam, a hydroelectric project in the Amazon region that drew fierce opposition from Indigenous tribes and environmentalists.
Its legacy may create challenges for the current plan. The corruption investigations drove many of the involved companies into bankruptcy, while the ensuing end of an era of massive public investments hit firms that hadn’t been implicated, resulting in heavy debts, layoffs and legal disputes.
As a result, the government will have to carry out large projects without many of the major contractors that delivered them in the past.
At first, local companies are likely to form consortia with foreign partners in order to participate in investment projects, chief of staff Rui Costa told reporters at the event. After they get stronger and are able to obtain financing, they will be able to handle projects by themselves, he said. — Bloomberg
