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As 2012 will mark the 5^th year anniversary of the launch of the Brazilian government led Growth Acceleration Programme (Programa de Aceleração do Crescimento, PAC), specialists speaking to Brazil’s “IG Economia” newspaper recently expressed their concerns related to the low economic growth directly related to the various infrastructure projects happening around the country.

After over 30 years where little investment was applied into the country’s railroads, highways, airports, energy generation and housing, the PAC (phased in two stages) was welcomed by all sectors of the economy and viewed from an international perspective as a positive step in the right direction.

However, the slow pace of financial resource allocation has meant that the programme’s advancement is falling short of the original objectives.  According to economist Mansueto Almeida: “The PAC has failed in its attempt to provide greater agility in the execution of infrastructure development due to the disadvantageous licensing processes which end up getting contested by the controlling organs.  In addition, the government continues to engage in contingency planning in line with the public investment which is delaying project execution.”  Last year the Globo newspaper highlighted the favourable contractual allocations and concessions being granted to a group of companies collectively known as the “four sisters” (Queiroz Galvão, Andrade Gutierrez, Camargo Corrêa and Odebrecht) – despite the fact that they may not be the best to undertake the works.

Carlos Campos, coordinator of Economic Infrastructure at the Institute of Applied Economics (IPEA) also commented that, whilst there have been notable advances, development is moving slowly.  He referred to the transport sector where some R$ 304 billion had been deemed to be the necessary investment requirement but “with the PAC 1 and PAC 2 put together, the volume has reached 35 percent of this amount – it’s an improvement but very much under the real necessities.”

Whilst the modest pace of investment growth was attributed to public spending cuts, largely fuelled by concerns over inflation levels being above targets, the Brazilian government has stated its intention to invest a previously held-back R$ 50 billion to bring what is aimed at being a minimum 4-5 percent growth rate for 2012.  Campos stressed the importance of the PAC being the driving force of infrastructure development that will enable Brazil to comfortably reach this target annual GDP growth rate – but highlighted that not all the investments have the same potential to be able to influence economic progress stating: “energy investments undertaken by private groups have more positive impacts.”   He also pointed to the fact that in other areas, investments that are more dependent on fiscal financial resources are likely to have a lesser effect on economic growth due to the dynamics of how funding is applied.  Almeida further brought attention to the concern that the government is arriving at its limit on the amount that can be invested in new projects: “[the government] is not planning to increase resources through broadening the tax burden nor reducing the resources within social programs to be able direct them to the PAC.  To maintain or accelerate the pace, it would be necessary to cut the cost of funding and improve the management of public administration, freeing up resources to increase investments in infrastructure.”

The IPEA research also revealed the 81 percent of the PAC disbursements have been allocated to Petrobras, the Brazilian Bank for Economic and Social Development (BNDES) and the Minha Casa, Minha Vida (“My House, My Life”) programme.  Almeida also bought attention to the fact that the PAC in 2011 had become more dependent on social housing – which this year should see investments in line with 2010 values.  However, as demonstrated in a recent blog post / video on a Minha Casa, Minha Vida project in Paraná – there is a growing amount of evidence of budgeting anomalies, dubious public-private partnerships and bad quality produced housing being delivered.