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Over the past decade, this has taxed the country’s existing roads, railways, ports and airports, both in terms of the movement of passengers and goods.

SEATTLE, WASHINGTON, UNITED STATES OF AMERICA, 6 December 2020 /[To enable links contact MENAFN] EINPresswire.com/ – Market Overview
Brazil’s infrastructure sector is diverse, comprising road, rail, ports, airports, telecommunications and power generation and transmission infrastructure. Each of these subsectors enjoys specific driving forces and benefits, and is plagued by specific challenges.

A common denominator is that they all rely heavily on government spending and PPP projects, which in turn depend largely on borrowing or financing debt instruments. Infrastructure projects are characterized by long gestation periods and cumbersome land clearing and other procedures, which often result in overruns in project costs and schedules. The poor financial health of many infrastructure firms has resulted in lenders trying to limit their credit exposure to the infrastructure sector, which in turn leaves many players cash-strapped. As such, the market itself has driven only the larger and financially stronger companies to survive, thus contributing to the consolidation of the sector.

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An increasingly affluent and urban middle class is increasing in Brazil. Over the past decade, this has taxed the country’s existing roads, railways, ports and airports, both in terms of the movement of passengers and goods. To address this, the government has adopted various programs, policies and initiatives aimed at bridging the Brazilian infrastructure gap, helping to bring infrastructure in economically less developed countries on par with richer countries.

Brazil also needs to expand existing ports and in some cases, even build new ones, as some have been landlocked in urban areas developed after ports were built. Such an expansion of the port is not possible, thus requiring new development. As Brazil welcomes more international passengers and increases the number of domestic air travelers, Brazil also needs more, bigger and better airports.

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Brazil therefore has substantial project savings in the short to medium term, which bodes well for the growth of the infrastructure sector and the economy in general, given that good infrastructure is essential to the success of business activity.

Brazil carries the majority of road passengers and cargo on the national highway network, which represents a very small share of all the country’s roads. Therefore, there is a great demand for new roads, as well as for existing road surfaces. The government has adopted measures to attract more FDI to the country to boost tourism, both in terms of domestic tourists and large-scale international MICE events. This has also led to a higher demand for airports and airport infrastructure. Brazil’s foreign trade needs have weighed on the country’s existing ports, requiring the construction of new ports. The large number of infrastructure projects that are PPPs means that small companies often work side by side with larger ones, which helps them increase their level of specialization. On the other hand, small-scale companies do not have the capacity to handle large-scale projects, which means that typical Brazilian infrastructure projects (along with other factors such as access to finance) are conducive to sector consolidation. The government’s focus on developing infrastructure as a backbone for economic growth means that sector-specific administrative challenges are being addressed, which are expected to create a more efficient business environment that is also conducive to infrastructure sector growth.

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The holding forces for the infrastructure sector tend to be segment specific. For example, Brazil’s I power plant is dominated by coal, and domestic coal supply is often problematic. Natural gas power plants depend on imports of natural gas, and port and airport expansion is dependent on timely land acquisition. Road construction and construction in general, on the other hand, often affect wildlife areas and involve the displacement of indigenous peoples, which increases the administrative approval that projects need to obtain before they can start. Unexplained delays in administrative approvals and permits often result in project delays, as does the resolution of prolonged court disputes between companies. In Brazil, government agencies tend to function independently and are not required to coordinate with project authorities to facilitate approval procedures. Increased competition in all infrastructure segments and competitive competition for government projects are affecting company profit margins. In construction, inputs account for nearly half of construction costs, and construction raw material prices are erratic. This exposes the company to significant risks to the commodity and Forex market as well.

Bhanu reddy
Global Monitor
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