Brazil - Building the Country of Tomorrow - Final

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proceedings
As a result of 40 years of little investment, Brazil still lags its Bric counterparts Russia, India and China in the quality
and scale of its infrastructure, which in turn has restricted growth. However, Brazil is now undergoing the greatest
building programme in the history of Latin America, with government investment in infrastructure targeting urban
development and housing, roads and railways, ports and airports, and energy. The programme and the country
itself offer attractive opportunities to civil engineers – and the nature of many of the projects calls for innovative
engineering solutions. However, doing business in Brazil is not straightforward and interested parties must be
prepared for differences in culture and ways of working. This paper identifies the key developments under way in
major infrastructure areas. It then offers a pragmatic perspective on what engineers need to take into account to
pursue the opportunities that the massive construction programme has to offer.
Len Pannett MBA, CEng, MIEE
Freelance operational strategy consultant, Wallingford, UK
Proceedings of the Institution of Civil Engineers
Civil Engineering Special Issue 166 November 2013 Issue CE6
Pages 3–12 http://dx.doi.org/10.1680/cien.13.00026
Paper 1300026
Received 09/04/2013 Accepted 09/07/2013
Keywords: developing countries/infrastructure planning
ICE Publishing: All rights reserved
Brazil – building the country
of tomorrow
Civil Engineering Special Issue
Volume 166 Issue CE6
Brazil – building the country of tomorrow
Pannett
1. Introduction
The past 10 years have seen Brazil transform from being ‘the
country of tomorrow that always will be’ (as it has often been
described), to one of the top six economies in the world. Over the past
three decades, the country has emerged from military dictatorship to
become the third biggest democracy, from dark days of hyperinflation
to being so economically and politically sound that it has been one of
the darlings of investors over the past few years.
It has moved itself to become a significant player on the world
stage, such as leading the United Nations (UN) mission in Haiti and
seeking admittance to the UN permanent security council, making oil
and gas finds off the coast that are propelling it to the top of the list of
oil-producing nations, and hosting the most significant future sports
events on the planet, namely the 2014 FIFAWorld Cup Brazil and the
Rio 2016 Olympic and Paralympic Games.
In growing, Brazil has continued to advance in those areas where it
was already the leader, such as in the sugar-cane-based production of
ethanol, agriculture and commodities, and it has also been seeking to
remedy the major sectors that have held it back in the past, particularly
wealth distribution and education. It is now turning its attention to the
third big area for improvement for growth: infrastructure. This latter
sector in particular presents some of the world’s most significant
opportunities and challenges for investors, suppliers and operators,
particularly in the areas of civil engineering.
This paper describes what is happening in the country in terms of
the major infrastructure areas for growth and development that have
been mapped already, and what particular nuances need to be taken
into consideration by organisations which wish to pursue them. Much
of the data presented to quantify the forthcoming projects comes
from the Brazilian government, and it has been presented variously at
several conferences and forums over the past 12 months, particularly
at a series of investment forums which took place in March 2013 in
London and New York.
2. Brazil: a changing nation
Brazil is a country of continental proportions: a population of over
190 million people live across its 8·5 million km2
, making it the fifth
largest by landmass and population. It has 7500 km of coastline, 3·3
million km2
of Amazon rainforest and the biggest river system in the
world, providing the biggest national volume of fresh water.
Historically, Brazil was the first major exporter of gold, diamonds
and other precious stones, as well as coffee and rubber. It is a
leading exporter of iron ore and other metals, metallurgical products,
chemicals, soybeans, sugar and sugar-based ethanol, and other
foodstuffs such as beef and oranges (The Economist, 2007). It now
has a thriving industry, which includes the world’s second biggest
mining conglomerate, the third biggest aircraft manufacturer, the
tenth largest oil and gas company, and a technology base that designs
hardware, creates software and puts satellites into orbit.
Its electorate of 100 million voters is the democratic basis for a
US$2·5 trillion economy (2011 figures), which has achieved annual
growth rates of up to 7·5% over the past 10 years. It emerged from the
economic crisis of 2008 relatively well, although indications are that
the growth rate will slow to a more modest 2–3% in 2013 (Goodman,
2013). The country has moved further into the forefront of the global
stage, most noticeably when it overtook the UK in terms of gross
domestic product (GDP) in late 2012, a position which, although lost
earlier this year, it will no doubt return to and better in the coming
years. ‘Brazil has always been big; perhaps, though, it hasn’t been
as visible as it is today’, Roberto Jaguaribe, Brazilian ambassador to

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Volume 166 Issue CE6 November 2013
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the UK, told the audience of the Brazilian Infrastructure Forum in
London in March 2013.
The country’s economic success has been achieved, largely, by the
global commodities boom of 2002–2010, which saw China transform
itself through an intensive building and industrial expansion
programme, with Brazil as its leading supplier of materials for that
transformation, particularly iron ore, oil and other commodities. In
parallel with this increase in exports, Brazil enjoys political stability
and a drive to lower national interest rates, stabilise the exchange rate
and control inflation, all within defined, narrow bands – something
altogether more remarkable given the multi-party coalition that now
forms the Brazilian government.
The recent uncertainty and upheaval in the traditionally more
economically stable regions of Europe and the USA have presented
Brazil with an opportunity to improve its internal situation, from
redistributing wealth and raising living standards of the poorest parts
of society to long-overdue investment in its infrastructure, urban and
rural. This improvement has been catalysed by the country’s hosting
of a series of world-scale events, from the 2007 Pan-American
Games in Rio de Janeiro, the CISM Military World Games in Rio in
2011 and the 2012 UN-sponsored Rio+20 sustainable development
conference to the coming 2014 FIFA World Cup Brazil and Rio
2016 Olympic and Paralympic Games. Indeed, the business cases for
the latter two were predicated on legacy improvements to transport
infrastructure as well as the building of sporting venues, assurances
that have so far been very slow to materialise.
To lead and administer the required infrastructure investment,
the government has recently created public companies such as
the national-level planning and logistics company Empresa de
Planejamento e Logística (EPL) and the state-level Olympic
municipal company Empresa Olímpica Municipal (EOM). These
vehicles will work with both public and private bodies to drive and
implement infrastructure strategy at federal, state and municipal
levels.
The renewed investment has arisen from the increased demand
of an increasingly wealthy and vocal population, a larger and more
active industry, and the recognition that the lack of investment over
the past 40 years has for too long held the country’s growth rates
back. ‘Brazilian growth will be led by infrastructure investments’,
the head of the Brazilian National Development Bank, Luciano
Coutinho, told audiences in New York and London earlier this year.
There is, however, a long way to go: according to the World
Economic Forum (WEF), Brazil has the worst infrastructure in terms
of quality of all the so-called ‘Bricsa’ countries (Brazil, Russia,
India, China and South Africa) and most of the other emerging
countries, including the Philippines, Indonesia, Mexico, Cambodia
and Thailand (Rossi, 2013) – see Figure 1. The overall result of this
is that Brazil is enjoying the biggest push in engineering projects for
a century, with projects to
n build, develop and replace urban, industrial and high-speed
railways
n open new roads and duplicate existing ones
n build new ports and develop current ones
n open new and extend current metro lines
n expand the number and scale of airports
n create new housing and improve industrial facilities.
‘It is an aggressive ambition, but necessary: there is no alternative
if Brazil is to grow’, according to Bernardo Figueiredo, EPL
president, when addressing audiences of investors in London and
New York in March 2013.
3. An attractive proposition
Brazil has a history of tackling ambitious projects and the
country’s engineering base has shown itself to be technically able
to deliver them. The Carajás iron ore mine, opened and operated by
the formerly state-owned conglomerate Companhia do Vale do Rio
Doce (Vale), is the biggest such mine. First operational in the early
1980s, and with 7·2 Gt of proven and recoverable reserves, it called
for the opening and operation of several railway lines into and out of
the mine and its region to move supplies into the area and iron ore
out, and the construction of nearby towns to accommodate over 7000
people involved in the establishment and operation of the mine, as
well as the challenge of the mine itself.
The Itaipú hydroelectric dam (Figure 2), which entered operation
in 1984, generates 14 GW, 22% of Brazil’s entire electricity supply,
a capacity only surpassed by the Three Gorges Dam in China. It was
constructed over 10 years on the Brazil–Paraguay border by a set
South Africa
Overall
581 14469 87 101 107
China India RussiaBrazil
South Africa
Roads
42 54 86 136123
China India RussiaBrazil
South Africa
Railways
4622 27 30 100
China IndiaRussia Brazil
South Africa
Ports
52 59 80 93 135
China India Russia Brazil
South Africa
Air transport
infrastructure
15
Best performer Worst performer
7068 104 134
ChinaIndia Russia Brazil
Figure 1. Global ranking of quality of infrastructure – Brazil has the worst
infrastructure in terms of quality of all the so-called Bricsa countries

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of largely Brazilian consortia, employing 40 000 people, and using
sufficient concrete to build 210 Maracanã stadia, enough iron and
steel for 380 Eiffel Towers, and the excavation of earth and rock with
a volume equivalent to 8·5 times that of the Channel Tunnel.
However, following those two megaprojects in the early 1980s,
there was little investment in infrastructure in the country until 2007,
a fact that held back the country during the turbulent economic
times of the 1990s. That was to begin to change in 2007 with the
establishment of the federal government’s programme for accelerated
growth, Plano de Aceleração de Crescimento (PAC), a R$503 billion
(£157 billion) programme of economic policies and investment
projects to transform infrastructure, covering ports, roads, airports,
sanitation, energy, waterways, railways and metros, as well as other
sectors, with investment during the period 2007–2010 coming from
federal, state and private bodies (Figure 3).
The funds were expanded by a further R$142 billion (£44 billion)
in 2009, and followed by a successor PAC2, which for the period
2010–2014 is directing a further R$1·59 trillion (£497 billion) at urban
redevelopment, the provision of basic services to local communities,
provision of housing, clean water and electricity for all, improving
the logistics network (rail, road and riverine) across the country, and
ensuring security of energy generation using clean and renewable
sources, as well as developing the recently discovered ‘pre-salt’
offshore oil fields to increase national oil and gas production.
25
20
15
10
5
0
PACinvestmentdisbursements:£billion
2007
2.4
2008 2009 2010 2011 2012 2013*
* Projections
2014*
3.7
6.0
7.3
9.3
13.1
17.9
22.7
Figure 3. Growth of financing from the Brazilian government through
the PAC growth acceleration plans – the majority is being spent on
infrastructure
Figure 2. The 1984 Itaipú hydroelectric dam generates 14 GW, 22%
of Brazil’s entire electricity supply, a capacity only surpassed by the
Three Gorges dam in China (courtesy Gilmar Antonio Piolla, Acervo
Itaipu Binacional)

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Pannett
Recent non-conventional oil and gas finds, including shale, have
also been considered for investment in this package. Following the
widespread unrest earlier in 2013, president Dilma Rouseff also
announced a further R$50 billion (£15 billion) destined to urban
transport, although there has been no further declaration of the source
of this funding nor details of what it will be spent on.
As well as government-funded programmes, the country is
embarking on a course of seeking private companies to develop,
build and operate much of its infrastructure, such as airports,
ports, roads and railways. For example, in 2012, the president
announced a R$133 billion (£42 billion) programme to transform
the country’s largely decrepit highway and railway system. Through
this scheme, businesses will be responsible for much of the building
and amelioration of some 7500 km of roads and over 10 000 km of
railways.
The mechanisms will largely be a variety of private–public
partnerships (PPPs), using lessons learnt from other countries’
experiences in this area as well as past attempts at leveraging PPPs in
Brazil itself. Part of the motivation for this is the perception that the
private sector is more effective at completing these types of project
on time and within budget. Richard Dubois, infrastructure partner at
PwC in São Paulo, observed that, ‘Private companies usually build
construction projects in Brazil in half the time and at 60% of the cost
of the public sector’ (Winter and Goy, 2012).
The PPPs will finance concessions for construction and operation
of the infrastructure, with durations of 25 and 35 years, depending
on their nature and sector. However, the commitment to PPPs may
be eroding, as evidenced by the changes to the financing of the high-
speed train between Rio and São Paulo. Politically, it is easy to see
the attraction of this investment. ‘Brazil is a big country and, being
big, our problems also are’, Gleisi Hoffmann, the president’s chief of
staff, told an audience of investors earlier this year, continuing, ‘Our
solution is investment, investment, investment.’
Figures from the Brazilian economic and social development bank,
Banco Nacional de Desenvolvimento Econômico e Social (BNDES),
indicate that every increase of 1% in the supply of infrastructure can
equate to a rise of 0·5% in GDP. Overall, these investment packages
will see government-backed investment in infrastructure rise from
1·62% in 2006 (Brazilian Planning Ministry, 2010) to a forecasted
4·5% of GDP in 2013 (Veja, 2012), with a view to reaching 5% of
GDP over the coming 4 years. This compares to the UK’s figures of
2·6% of GDP in 2006 (HM Treasury, 2011) rising to 2·9% in 2008.
4. Urban and housing redevelopment
The growth of urban centres in Brazil over the past 40 years has left
most with a straining infrastructure, overburdened transport systems
and the ills that come from a lack of urban planning. For example,
some parts of Diadema, a poorer area of the capital city São Paulo,
saw growth with an average rate of 16% per year between 1950 and
1980. São Paulo itself has nearly doubled in size from 1970, from a
population of 5·9 million to over 11·3 million today.
Spurred by a combination of hosting world events and the receipt
of revenues from the commodities boom, many cities are now
transforming themselves. For example, the former capital city of Rio
de Janeiro is presently redeveloping its port area, much as has been
carried out in London, San Francisco, Barcelona and Buenos Aires.
The aim is to provide a mix of residential and commercial space,
threaded with efficient and open transport links to the rest of the city,
while opening up many of the older, heritage buildings, including
former royal palaces and portside warehouses. This development
is driven by the need to support the expanding oil and gas industry,
whose resources struggle to find accommodation in the full city and
its clogged transport arteries.
The Porto Maravilha development (Figure 4) includes the removal
of one of the main road traffic viaducts in Rio and re-routing it into
two subterranean, coastal tunnels, with a combined extension of
3·5 km. Planned to be operational by the start of the Rio 2016 games,
and at depths of up to 38 m, part of the tunnel system will comprise
twin galleries, each containing three lanes, forming an underground
dual carriageway. A further three tunnels are being bored in the area
to improve the circulation of traffic and a new light bus rapid transit
system, with the adaptation and inclusion of 200-year-old, slave-
built stretches that had previously been sealed. This £2·5 billion
programme will result in over 5 million m2
of usable real estate for
commercial, residential, cultural, tourist and educational purposes.
More widely, the PAC is funding the construction of over 2 million
new houses in a project termed ‘minha casa, minha vida’(‘my home,
my life’), aimed at providing social housing for low-income families.
This £24 billion project has seen further subsidies from local
governments to accelerate construction and remove local housing
bottlenecks, and many of the new houses will accommodate families
who will be moved as part of the preparations for the forthcoming
sports events.
5. Rail and metro
The transportation of goods across the country has been a major
issue for Brazilian industry since its earliest days. The arrival of the
UK as a major trading partner in the nineteenth century brought with
it the newly developed railway, and British engineers and companies
were instrumental in opening up the country, laying new lines and
designing and building rail stations across the land. For example
Rio’s two main termini, Central do Brasil and Estação Leopoldina,
were designed by Scottish architect Robert Prentice and some of the
first lines, such as the 1867 project linking the port of Santos to São
Paulo, were built by British firms.
However, during the 1930s and 1940s and under pressure from
the growing automotive industry, the government sought to move
transportation away from rail onto roads and investment in the rail
network largely stagnated. From then on much of the investment
in overland rail has come from mining companies seeking to move
their ores to coastal and riverine ports. Vale, for example, now owns
and operates over 10 000 km of railways across the country. This
situation has resulted in a divided network, often with separate lines
(and thus separate operators) for passenger and cargo, between and
within cities. Of the current 29 000 km only 4% is electrified, with
consequences on the cost of running the network as well as on carbon
dioxide emissions.
During the 1970s many of the larger cities, particularly São Paulo
and Rio de Janeiro, began to invest in metro-based solutions to
questions of mass transit. In the former, the scale of the conurbation
meant that the network grew rapidly and today it comprises nine
lines. In Rio restrictions due to the geography of the city have kept
the network to a more conservative two subterranean lines with a
total of 36 stations. Other cities have small but similar networks.
The lack of scale of rail operations, both over- and underground,
has now been recognised internally. The Brazilian government

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Pannett
at federal, state and city levels is aiming to improve integration,
to expand existing lines and to open new ones. By 2020 the EPL
is aiming to oversee the construction of over 10 000 km of new
railways, resulting in an overland network of over 40 000 km (which
compares to China’s 90 000 km today). ‘We are virtually building the
country’s entire network’ says Bernardo Figueiredo. To achieve that,
over R$91 billion (£28 billion) has been earmarked to be spent over
the coming 5 years.
Key projects include construction of the country’s first high-speed
line, a 511 km link between the cities of Campinas, São Paulo and
Rio. This has an expected initial demand of 7·1 million passengers
in the first year of operation, rising to 11·3 million over 10 years
and to 27·8 million over 30 years (Halcrow-Sinergia Consortium,
2009), although those figures are based on a highly optimistic start of
operations in 2014. The aim of this line is to transfer passenger traffic
from the Rio–São Paulo ‘air bridge’ and provide a more competitive
but time-neutral solution for travel between the cities.
The project is not without technical challenges as its route will take
it through mountainous and highly urbanised terrains, with some 40%
of the route consisting of tunnels, viaducts and bridges. Financing
of the project was to be through a series of PPPs but this has now
been changed to being a public project to be tendered as a set of ten
parts. The total investment for the project, including construction and
resolution of land issues, is estimated at over R$35 billion (£11 billion).
It should be pointed out that issues of demand forecast, planning
permission and land management are yet to be resolved.
Other projects include more than 12 city-to-city lines, which will
not only open up rail as a realistic option for intercity passenger travel
Figure 4. Museum of Tomorrow at the £2·5 billion Porto Maravilha
development in Rio de Janeiro which is due for completion in 2016. The
project includes removal of a major urban road viaduct and re-routing it
into 3·5 km of coastal tunnels (courtesy Prefeitura do Rio de Janeiro)
As well as government-funded
programmes, the country is
embarking on a course of
seeking private companies to
develop, build and operate
much of its infrastructure,
such as airports, ports, roads
and railways

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Pannett
but also open up the country for internal and international movement
of cargo, such as the 4200 km North–South line (Figure 5) linking
Belém in the north to Porto Murtinho in the south.
Expansion of the metro networks is also planned in 24 towns,
including an investment of R$7·7 billion (£2·4 billion) in São Paulo
alone to double the annual number of passengers, modernise the
stock and upgrade the signalling system. A high-capacity urban
monorail line in São Paulo will be built, rivalling Tokyo’s 300 000
annual passengers line.
6. Roads
As with rail, the road network in Brazil has suffered considerably
through lack of a joined-up, strategic vision for its development, as
well as low levels of investment. While some major projects have
been attempted in the past, such as the ill-fated Trans-Amazon
Highway in the 1980s, it is only in the past few years that investment
has been earmarked for the construction and operation of new
highways.
As part of the PAC2 tranche of funding, R$42 billion (£13 billion)
will be spent on increasing the highways network by over 7500 km.
Of those, nine major projects, mostly across the central belt of the
country, will be contracted over 2013/2014, using PPP-like funding
as with other areas.
Improvement, maintenance and operation of many of the existing
routes will be passed to the private sector, and both new and existing
operators will be encouraged to use road tolls to finance their
ongoing costs.
7. Ports
Given Brazil’s nearly 7500 km of coast and its historical position
as a major exporting nation, it is surprising that the scale and quality
of its port infrastructure is far below that which would be expected.
As well as being managed locally and publically, with little national-
level planning, the number and scale of ports in the major trade points
along the coast, as well as their internal sophistication, are logistics
bottlenecks. For example, most of the ports lack efficient container
management on the dockside, leading to extremely long lead times
for their clearance coming into and exiting the country.
Over the past 15 years, many large-scale planning permissions
have been granted to new extraction and processing plants in
mining and agriculture when the bidder has agreed to construct new
terminals and facilities. For example, the giant food commodities
firm, Cargill, built a new terminal in Santarém, on the Amazon
River. Other firms have taken a more strategic view, such as the
EBX Group, which is building the so-called Super Port of Açu.
Porto Central, in the state of Espírito Santo, is currently developing
a 6800 ha deep-water facility that is intended to rival Rotterdam in
scale and volume of handled cargo.
Initially part of the earmarked PAC funding, Brazil is also
planning to transform the management and development of port
facilities. The state of Rio alone will gain four new ports with an
investment of R$9 billion (£3 billion). With the first to be opened
by 2016, these ports will support the exploration operations, and
eventual production, in the pre-salt offshore oil and gas fields. They
will comprise a mix of onshore and offshore facilities, enabling
unloading of oil and gas, as well as refuelling of tenders and carriers
(Batista, 2013). This trend is expected to continue, with the federal
government changing legislation to encourage the opening up of the
construction and operation of port terminals by private entities, and
the implementation of a ‘port lease’ approach.
8. Airports
In December 2012, the Brazilian government announced an
ambitious target: to build 800 private and public, regional and
local airports across the country over the coming years (Franco,
2012), with the aim of connecting medium and larger towns to the
air network. Although not disclosing what level of investment is
expected to fund this vast expansion, the president said, ‘We want
cities of up to 100 000 inhabitants to have airports within 60 km: we
intend to have a very strong regional air programme’ (Franco, 2012).
With a country of continental dimensions, air travel is a necessity
for many, and improvements to the main air hubs, such as São Paulo,
Brasília, Belo Horizonte and Rio, as well as additional, regional
airports are often cited by travellers as a top requirement for meeting
the growing demand. For instance, in March 2013, Rio’s state
government announced an ambitious aim of increasing passenger
capacity at the city’s main airport from its current level of 15 million
Figure 5. The 4200 km North–South railway line provides a vital cargo
route between Belém in the north and Porto Murtinho in the south –
over 12 other city-to-city lines are planned (courtesy Edsom Leite)
Porto Central, in the state
of Espírito Santo, is currently
developing a 6800 ha deep-
water facility that is intended
to rival Rotterdam in scale and
volume of handled cargo

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to 70 million per annum by 2042, a target which will require it to
become the first three-runway airport in the country. Investment in
this expansion is expected to assign R$11·8 billion (£3·7 billion) for
São Paulo and Rio alone, and there has been a significant interest
from several consortia worldwide for the concessions in Rio and Belo
Horizonte alone (Valor, 2013).
9. Energy
Of all the infrastructure sectors, oil and gas has been the most
transformative in Brazil over the past 25 years. The recent ultra-
deep-water finds in the so-called pre-salt basin off the coast of Rio
and Santos have propelled the country from being a net importer of
oil to being an exporter, eligible for membership of the Organisation
of Petroleum Exporting Countries.
Present estimates of the area’s reserves alone would more than
double the country’s reserves, with up to 35 billion barrels of oil
equivalent found in the past 10 years (Gaier and Bonato, 2013).
These finds have spurred the sector (Figure 6), not just the upstream
producers but also the downstream, an area where Brazil has
traditionally fallen behind. This has had a consequential impact on
the associated supply chain, from marine construction of rigs and
tenders, to shore-side pipelines, storage and refinery facilities.
Natural gas is also beginning to emerge as a major power source
in the country, driven by conventional, on- and off-shore finds as
well as early prospects for non-conventional sources. The challenges
of extracting both oil and gas from these deep-water and non-
conventional sources will require innovative approaches, both in the
design and the construction of facilities.
Headlined by the mega-project at Itaipú, Brazil has a long history
of using hydroelectric power to feed its energy consumption.
Indeed, today Brazil can be said to have the most sustainable energy
generation, with some 68% of its power generated by that means
(ANEEL, 2013). Despite environmental and land use concerns, this
trend is continuing and presently there are 23 projects to be auctioned
by 2017, with a combined generation capacity of 21·4 GW and a
budget of US$40 billion (£27 billion).
In addition, two ongoing projects are noteworthy because of their
scale. Belo Monte, although long-awaiting final planning permission,
will channel the waters of the Xingu River to generate up to 11·2 GW
of power, making it the third largest such facility in the world, at an
estimated cost of US$16 billion (£10·7 billion). The Jirau dam will
have a span of 8 km over the Madeira River in the state of Rondônia
and feature fifty 75 MW turbines, more than any other dam in the
world, resulting in an installed capacity of 3·7 GW. Presently this
project is estimated to cost US$15·6 billion (£10·4 billion).
This desire for sustainable generation is also reflected in other
areas. Wind power is set for a fast expansion, and by 2017 it is
Figure 6. The first combined oil and gas production platform entirely
constructed in Brazil started operation in the pre-salt offshore fields in
2009 (courtesy Agência Petrobras)

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estimated that 8·5 GW will be generated from offshore and onshore
wind farms. As with other infrastructure projects, this will be
achieved through a series of PPP-like structures, with 5·7 GW being
auctioned by 2017, with a value of US$11·9 billion (£7·9 billion).
The set of licence auctions in late December 2012 saw a high number
of bids, indicating that there is a real appetite for these types of
project in the country.
Several projects are also under way to transform the electricity
distribution network. Spurred by several large-scale blackouts over
the past decade, this network has been identified as being unreliable
and prone to failure. With World Bank and other international
bodies joining the private and public organisations to invest in this
transformation, it is as urgent to improve the supply to customers as
connection of many of the new-generation projects to the grid.
Brazil has also long had a global lead on alternative fuels,
particularly sugar-cane-derived ethanol. Propelled by a government-
subsidised programme in the 1970s to move away from petroleum-
based fuels, ethanol is now a major constituent of the road fuel
market, with 87% of vehicles sold in 2012 (ANFAVEA, 2013) being
‘flex fuel’, able of coping with all levels of ethanol–petroleum mixes.
This demand has had to endure a maturing supply, with the ethanol
industry only recently emerging from an agricultural-based model
to an industrial one. Central to this transformation is the need for
improved distribution and storage, as well as production facilities that
can operate with greater efficiency.
With a sector-wide acceleration in production capacity over the
past 10 years, Brazilian mills already achieve production volumes
higher than anywhere else and this is being expanded through the
use of sugar bagasse (the fibrous remains of crushed sugar cane).
However, with bigger harvests, themselves motivated by higher
demands for ethanol, the frequently antiquated production plants
are running out of capacity. Further investment levels will be tied to
commodity prices for sugar and ethanol, and these have suffered in
the past few years.
10. Working in Brazil
With so many opportunities across the infrastructure spectrum, Brazil
naturally is an attractive proposition for firms involved in the design,
construction and servicing industries, as well as those involved in the
supply chain of those sectors. But to make use of such opportunities
firms must be cognisant of what working in Brazil entails.
Working in a new country always brings with it the need to
understand and adapt to the particular nuances of the country’s
culture and situation, and Brazil is no exception (Figure 7). If foreign
organisations are going to pursue the many opportunities that the
boom in infrastructure investment presents, they must first have an
appreciation for the culture and ways of working. This section will
detail some of the more subtle aspects other than the purely fiscal and
legal differences.
10.1 Culture
An often-commented aspect of Brazilian culture is that, because
of its historical roots, it has a more European feel than American.
Business is highly relationship based, with negotiations made face
to face, and the increased use of technology such as Skype and web-
based video is beginning to enhance that.
Notably a friendly culture, attempts at developing business
remotely or only occasionally visiting the country tend to be
dismissed as coming from parties that are not truly interested. This
means that if an organisation has ambitions to expand in the country,
to bid and win tenders and be part of the growth of infrastructure
there, it needs to be based in the country.
It can be achieved physically, such as opening an office in
the country or acquiring a local firm, or by developing local
representation through the establishment of local partnerships or joint
ventures. There are financial benefits of this, as fiscal rules regarding
the transfer of funds from Brazil are notoriously strict, costly and
complicated.
Presence in the country also proves commitment as there is often
a view that foreign firms and workers, especially from the USA
and Europe, will leave if and when economic conditions ‘at home’
improve.
10.2 Language
Asawhole,engineeringbusinessislargelytransactedinPortuguese,
especially at the middle management and factory-floor level and
outside the major conurbations, although the senior management
levels will usually have a level of competency in English.
According to the British Council, only 5% of Brazilians speak
English, and only 36% of those who claim to have fluency actually
do (Amorim, 2012a). Therefore, employing Portuguese-speaking
resources will become a higher priority as foreign companies become
more deeply involved in a project, especially if these are to be
realised in rural and remote areas.
10.3 Resources
Brazil is presently enjoying historically low unemployment levels
of around 5·8% (IBGE, 2013), especially when compared to the
USA and European countries. However, the biggest challenge facing
organisations is the availability of suitable resources: according to the
Brazilian Institute of Engineers, there is a national shortage of some
800 000 suitably qualified and experienced engineers in the country
(Nogueira, 2013). Another survey of 721 engineering firms by the
Brazilian Economic Institute identified the shortage of qualified
personnel as presenting serious difficulties to over 41% of them
(Amorim, 2012b). They identified the very high level of competition
in the sector and a consequential rise in the cost of labour as being
symptomatic of this situation. However, the shortage is slowly
ameliorating.
For example, the rail sector was estimated to employ some 16 600
in 1997, rising to 44 000 at the end of 2012, with a parallel increase
in the number of places at universities and technical colleges to
qualify new rail-related engineers and technicians. In some cases,
this has meant the restarting of courses that had previously been
withdrawn nationally. In the oil sector, concession agreements
for the development of the pre-salt basin call for 1% of revenues
to be directed to research and development, particularly through
sponsorships, grants and scholarships at universities (ANP, 2005),
and 75% of royalties from the oil finds will be destined to education.
Even with the various initiatives, there will be significant, short-
term shortfall in trained, experienced and qualified staff, including
engineering, technical and managerial sectors, which will impact the
pace at which many projects can progress. Many companies, such
as Vale and Supervia, have accelerated in-house training courses
to help plug the gap. Seeing this gap as an opportunity, many
Brazilian expats have returned to their home country, driven by the
comparatively favourable economic and work conditions.

11
Pannett
Firms trying to make up the difference by importing non-Brazilian,
foreign-based resources have been faced with a lengthy bureaucracy
and very highly priced work visas, with the result that many opt to
invest more time, effort and money in other, more open and easier to
enter countries. To help that situation, the Brazilian government has
sought to ease the ‘red tape’ and cost of visas, and this approach is
expected to gain momentum over the coming months.
10.4 The ‘Brazil cost’
The World Bank’s 2012 annual global report Doing Business,
which evaluates the ease of starting a business, dealing with
construction permits, registering property, and paying taxes, ranks
Brazil at 130th out of 185 countries, below Vietnam, Paraguay and
Argentina (World Bank, 2012).
Furthermore, the WEF ranks Brazil last out of 144 countries in
terms of the burden of government regulation (WEF, 2013). This
bureaucracy is exacerbated by an impenetrable, often changing,
fiscal and regulatory environment at federal, state and city level.
Often these tiers contradict each other, adding costs and delays to
civil projects before, during and after construction. This is the ‘custo
Brasil’, the Brazil cost: the increased operational costs of doing
business in Brazil.
The cost includes high rates of taxation, both corporate and
personal, a legal code which mixes twenty-first century technology,
such as the use of web resources for submitting tax declarations,
with nineteenth century practices, such as the need to register one’s
signature with a notary’s office in order to sign documents.
For instance, on average, it takes 13 procedures and 119 days
of work to start a business in Brazil, and construction permits
demand an average 17 procedures and 469 days to get finally
authorised (Gomes, 2012). Before signing engineering documents,
including drawings, quality controls and engineering specifications,
engineers must be registered with the state’s regional engineering and
agronomic council (CREA), which requires the recognition of the
individual’s academic and professional qualifications and experience.
Although there have been some political moves to reduce the
Brazil cost, legislative changes have hindered such efforts. The past
few years have seen a greater emphasis on the protection of the
environment and national heritage, and this has been reflected in
stricter laws in the area which require more permits from federal and
state governments. Whereas in the past these areas were approached
with an almost cavalier attitude, this can no longer be the case.
For example, Anglo American, the global mining company, has
been hindered in the construction of its US$8·8 billion (£5·8 billion)
Minas Rio iron ore project largely because of delays in obtaining
environmental licences and archaeological approvals, many newly
introduced and with changing criteria. This situation has been
recognised and the EPL is positioning itself between the private
sector, which will build and operate projects, and the government
bodies and agencies that will issue licences. This, it is hoped, will
facilitate and accelerate licensing issues.
If firms and individuals are to consider participating in projects
in the country, this Brazil cost must be taken into account and
prepared for, through the use of local agents, qualified accountants
and recognised lawyers.
10.5 Time
As with all countries, the nuances of Brazilian culture bring
challenges to those operating in the country. One aspect that is
readily noticeable is that time keeping is not as rigorously followed
as in the USA and European countries. Meetings will start late
and go over their allotted time; deadlines will be missed. Together
with the need for relationships to be established before business
is transacted, this requires those working in the country to have
patience and perseverance, and to make allowances for such delays
in plans and schedules.
Frequently lack of timeliness spills over into the management
of projects, with many observers noting that projects tend to run
behind schedule for much of their life, only to have an increase of
resources (and therefore funding) in the latter stages to recover as
far as possible. For example, in contrast to the London 2012 venues,
most of which were completed long before the games were opened to
allow for testing and proving, most of the venues for the 2014 FIFA
World Cup, including the Maracanã Stadium itself, have been and
will be completed only days before the first matches to be played in
them are scheduled, such as this year’s Confederations Cup.
Already commentators have noted similar trends emerging for
other large-scale projects and forthcoming events.
10.6 Corruption
With a multi-party coalition-based government, a very uneven
income distribution and the lack of large-scale land reform, corruption
has been an ever-present problem in Brazil. ‘Corruption appears
much more staggering in Brazil than in other countries in Latin
America and the rest of the world’, according to Michael Pedersen,
head of the WEF Partnering Against Corruption Initiative (PACI)
(Pedersen, 2010).
According to the WEF’s Executive Opinion Survey (WEF, 2013),
the country ranks 65th out of 144 in terms of irregular payments
and bribes, 121st in terms of public trust of politicians, 122nd on
the business costs of crime and violence, 84th on ethical behaviour
of firms and 71st on judicial independence. This image has been
exacerbated by recent high-profile cases at the highest levels of
federal and state government, such as the so-called Mensalão case,
which found senior members of the ruling Workers Party and its
government allies guilty of accepting bribes for votes. This is very
much a recognised problem, and the issue is beginning to be tackled.
For example, the president removed seven of her ministers from
power in the first 2 years after taking office, although little has been
Figure 7. Carnival in Rio de Janeiro: organisations wishing to work in
Brazil need to understand and appreciate its unique culture

12
Pannett
done to prosecute those individuals.
Commercially, therefore, companies must put in place preventative
measures to counter corruption and to deal with instances where they
may and do occur. Companies with anti-corruption programmes
and ethical guidelines, such as those called for by UK anti-bribery
legislation, report up to 50% fewer incidents of potential and actual
corruption.
11. Conclusion – changing economics?
Roberto Jaguaribe told audiences in early 2013, ‘We are a rich
country, but still a developing country with many, many problems.’
After the success of the past 10 years, those problems are now
affecting the main economic statistics, and regaining the previous
levels of growth requires a step-change transformation in the quality,
availability and extent of infrastructure. Although this was broadly
recognised by the Brazilian government, whose desire to transform
that infrastructure is supported with very ambitious funding and
announcements of further future funding, it has been energised by the
widespread popular demonstrations over June and July 2013.
As the country deals with the bottlenecks that are holding it back,
it is clear that resolving them will require support and participation
of individuals, organisations and companies, particularly in
the engineering sectors where resources are scarce. While this
undoubtedly creates significant opportunities, if those entities are
to succeed then they must plan for the nuances and challenges of
working in Brazil, as their resolution will require investment of time
and money.
This paper opened with the statement that Brazil is often said to
be ‘the country of tomorrow that always will be’. Provided all the
pieces come together, if Brazil follows through with its promise
of funding and gets the expertise and support it needs to realise its
infrastructure ambitions, then, as Brazilian society changes for the
better, ‘tomorrow’ can truly become ‘today’.
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What do you think?
If you would like to comment on this paper, please email up to 200 words to the editor at journals@ice.org.uk.
If you would like to write a paper of 2000 to 3500 words about your own experience in this or any related area of civil engineering, the editor will be happy to provide any help
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