Rising Public Scrutiny of Infrastructure Projects

Recent protests in Brazil

Before Sao Paulo city tried to raise bus fares by 20 percent in June, Brazil’s president, Dilma Rousseff, enjoyed approval ratings above 70 percent. But in a few short weeks her popularity plummeted, causing pundits to question her chances for re-election in 2014, while some in her party called on former president Lula da Silva to return.

Rousseff’s troubles illustrate the complex political risks around infrastructure projects following Brazil’s demographic revolution, which has brought millions of people into the middle class over the past decade. This newly empowered group is demanding improved services at an affordable cost from government. But progress on unblocking traffic and delivering higher quality healthcare and education has been slow, and frustration has been boiling beneath the surface. This partially explains why protests broke out over a seemingly small fare increase. It also explains why protestors targeted expensive stadium projects designed in 12 cities in preparation for the 2014 World Cup, which is to be held in Brazil. The money could be better used elsewhere, say the protestors.

The Brazilian government is planning to hold more than 28 auctions to raise $107 billion in investments for the concessions of a number of highways, railways, ports, and airports. Protests have raised the risks of delays to the country’s auction timetable for infrastructure concessions, since the government will need to do more to assure investors of their projects’ attractiveness. In reaction to some of the biggest protests in the country in two decades, a number of state and local authorities have canceled fare increases. Planned toll hikes also have been canceled on at least three federal highway concessions. The government is reworking contracts to protect companies from lost revenue, which is a positive if future auctions of concessions are to succeed, but the perceived risk has risen.

Rising Public Scrutiny of Infrastructure Projects