Panelists (left to right) Zachary A. Kaplan, development specialist, DAI; Sergio Costa, director, Investe São Paulo; Jill J. Otto, associate investor, J.P. Morgan; and Lourdes Casanova, senior lecturer of management at Johnson
Infrastructure in Brazil: A Land of Opportunities
Every problem presents an opportunity
As an example of the scope of some of the infrastructure challenges facing businesses in Brazil, panelist Jill J. Otto cited a World Bank table that shows the number of hours an organization must devote to filing taxes in different countries around the world. The world average is about 277 hours, said Otto, who is an associate investor with J.P. Morgan. In Brazil, it takes an average of 2,600 hours. "Every problem is an opportunity in disguise," said Otto. "If you think about these numbers - what an amazing opportunity to turn this around and provide an opportunity for the private sector!"
The comparison was very apt for the session addressing Brazil's infrastructure at the 2012 Brazil Conference hosted by Johnson's Emerging Markets Institute, Brazil: A Pathway into the Future. In terms of its infrastructure, Brazil was ranked by the World Economic Forum as 104 out of 142 countries (China is 69, India is 86, and Russia is 100), said Zachary A Kaplan '06, a development specialist with international development consultant DAI. The country spends about $80B annually on infrastructure (about 1 percent of GDP), and would need to spend about 6 to 8 percent of its GDP to catch up with South Korea in 20 years, said Kaplan. That's an annual shortfall of about $125B, he pointed out.
Jill J. Otto, Associate Investor, JP Morgan
Along similar lines, Investe Sao Paulo Director Sergio Costa explained the state agency's mission to promote outside investment in the state of São Paulo. The major areas at present are oil and gas, grain, life sciences, IT and communications, and aerospace and defense, said Costa, who provides free consulting services to potential investors. The agency streamlines tax procedures, infrastructure concerns, and personnel searches for organizations interested in working in the region. As an example, Costa noted, with his agency's assistance, companies can slash the time needed to obtain an environmental permit from a year and a half to about four months.
Johnson's Lourdes Casanova, who specializes in Latin American markets, pointed out that Brazil's history of hyperinflation is partly to blame for the country's underinvestment in infrastructure. "When you have 70 percent inflation per month, how can you structure the financing of long-term infrastructure projects? It's impossible," said Casanova, adding that, although they have dropped to single digits, high interest rates remain a barrier to infrastructure investment. The Brazilian real, in addition, is fully tradable, which makes it more vulnerable to exchange rates (Russia, India, and China protect their currencies more, Casanova explained).
Otto spoke about opportunities specific to Brazil's hosting of the World Cup in 2014 and the Olympics in 2016, which she said will help raise Brazil's profile as a tourist destination. Although the country has a strong brand, it is actually visited less than the U.S., Canada, Argentina, and Mexico. "The World Cup and Olympics provide a fabulous opportunity to put Brazil in the spotlight and increase the flow of people to come to visit," she said.
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