Amid the Covid-19 pandemic, Tarcísio Gomes de Freitas has been telling interlocutors about the good prospects for concession processes
The list of workers’ safety items has gained a new addition in the heart of the northeastern agreste. While a helmet, ear protectors and a sturdy pair of gloves used to be enough, the workers building the Transnordestina Railway, which will connect the sertão to the ports of Pecém (CE) and Suape (PE), now wear surgical masks to continue their activities.
Transportation to the sites has also changed. Whereas Companhia Siderúrgica Nacional (CSN) used to fill its buses to transport staff, the vehicles now travel with only a third of the seats occupied. This is the new reality of a Brazil that did not stop. While in large urban centers, where work is mostly office-based, only those performing essential activities remain on the streets, there is no home office system for major infrastructure works.
With the risk of Covid-19 infection mitigated, since workers operate in open spaces with plenty of distance between them, the construction sector, alongside agriculture, promises to pave the way out of the serious economic crisis beginning to take shape in the aftermath of the coronavirus pandemic.
President Jair Bolsonaro published a decree this Thursday, the 8th, classifying civil construction as an essential activity — one that cannot stop — while the disease is present in Brazil. And even before the Federal Government confirmed that these activities could not be interrupted, the figures show that, although affected, the sector continues to operate. Contrary to the general behavior of prices in April, which recorded the first deflation in more than 20 years, the national cost of construction ended the month up 0.25%. Spending on materials for buildings and works rose by an average of 0.09%, while labor costs rose 0.42%. The data are from the National Civil Construction Index (Sinapi), released by the Brazilian Institute of Geography and Statistics (IBGE). On another front, governors such as São Paulo’s João Doria and Rio de Janeiro’s Wilson Witzel did not prohibit construction works from continuing.
Even with Bolsonaro’s endorsement, the heads of the major construction companies are, of course, wary. Large companies in the sector are hesitant about continuing projects, worried about the risk of default by the Federal Government, and are rushing to law firms seeking legal support to halt public works without facing sanctions. Among the demands sent to Bolsonaro and to Ministers Paulo Guedes, of the Economy, and Tarcísio Gomes de Freitas, of Infrastructure, are the postponement of federal tax payments, easier access to credit and the suspension of payments under Refis and of contractual obligations, in order to continue works and mitigate the impacts — even if offset by continued operations — on production speed and costs.
A preliminary survey by the National Confederation of Industry (CNI), released on Tuesday the 5th, shows that even before the pandemic spread more visibly across the country, as it did in April, the sector had already begun to be affected. According to CNI, between February and March, the activity level index stood at 28.8 points, “which shows a very sharp and widespread decline”. This indicator ranges from 0 to 100, with a dividing line of 50 points separating growth from decline in activity. Values below 50 points are considered a contraction in the sector.
As the core of different Federal Government programs for emerging from the announced economic crisis, the direction of infrastructure became a central topic at the Esplanada dos Ministérios during the pandemic. After presenting President Bolsonaro with the risks of an interventionist adventure, Minister Guedes, together with his Infrastructure Secretary, Diogo Mac Cord, gave traction to the Pró-Infra Plan, a bold plan to attract private investment in civil construction projects. The idea of the project is to standardize the procedures for selecting, preparing and evaluating projects carried out through public-private partnerships and concessions, in order to speed up projects which, according to the Ministry of Economy, take on average two years to get started, and to increase the predictability of spending on works.
The idea of the project is to standardize the procedures for selecting, preparing and evaluating projects carried out through public-private partnerships and concessions, in order to speed up projects which, according to the Ministry of Economy, take on average two years to get started, and to increase the predictability of spending on works. To attract private capital, Guedes seeks to “strengthen strategic prioritization and develop a portfolio of high-quality projects”, ranked in order of priority, and to improve project management capacity and accountability, in addition to modernizing the public procurement process. “The initiative represents economies of scale, as well as facilitating review and clearance by oversight bodies, especially the Federal Court of Accounts”, says Giuseppe Giamundo Neto, who holds a master’s degree in State Law from the University of São Paulo and is an infrastructure specialist. The project also includes initiatives for specific sectors, such as basic sanitation, telecommunications and electricity, which depend on the National Congress to move forward (read more here).
Guedes’ project consists of creating mechanisms to attract the private sector to infrastructure projects, rather than public funding of works, in a scenario in which the country’s debt will reach 90% of Brazil’s entire Gross Domestic Product (GDP), according to the World Bank. According to the project presentation, to which VEJA had access, the proposal involves drafting reforms that reduce the regulatory burden and facilitate private investment in infrastructure, and preparing the ground to attract companies based on the country’s logistics bottlenecks, whose precariousness, the report points out, became more evident with the arrival of the pandemic. “The study tackles precisely the biggest problem, which is errors in project preparation, the main reason many are blocked by the Federal Court of Accounts”, says Bernardo Figueiredo, former president of the Planning and Logistics Company (EPL).
The understanding within the Ministry of Infrastructure is that Pró-Brasil will undergo changes with the proposals to improve Brazil’s business environment, using the Ministry of Economy’s study, but the State will need to step in where the private sector is unable to operate — a view supported by experts. The measure would be enabled through credit from the National Bank for Economic and Social Development (BNDES) and Caixa Econômica Federal, with financing of up to BRL 5.1 billion by 2023. “The private sector will come out of this crisis in recovery mode, in isolation, badly hurt. It is unlikely to lead a growth process. Industry has absurd idle capacity, and nobody invests with idle capacity”, says Venilton Tadini, CEO of the Brazilian Association of Infrastructure and Basic Industries (Abdib).
According to the text, the Ministry of Economy projects exponential growth in the country’s GDP with the consolidation of a red-tape reduction program for private investment — more robust, it should be noted, than those projected through injections of public funds. The ministry projects that, with the project in place, the country’s economy will grow 3.13% as early as next year, compared with 2.94% if “Marinho’s PAC” is adopted, as Guedes nicknamed it, in reference to the Growth Acceleration Program devised by the PT governments. The following year, the Brazilian economy would grow 3.42% if all phases of the proposal are consolidated. Presented in an incipient form, the project designed by the Ministry of Regional Development projected the creation of 1 million jobs by 2022 (a scenario refuted by the Ministry of Economy). The report indicates that the state investment project would create only 666 jobs next year and 1,174 new jobs in 2022.
Despite the slowdown in works, 88% of them have not stopped since the disease arrived in the country. And the Ministry of Infrastructure’s outlook is not among the worst. Tarcísio Gomes de Freitas has been telling interlocutors about the good prospects for major concession processes this year, and projects private investment of around BRL 250 billion in the coming years. The minister’s reading is that, since Brazil has huge infrastructure gaps, foreign investors will have an appetite for long-term investment in the country once the crisis is over. Highway paving and bridge construction are also going full steam ahead, according to the ministry. On Tuesday the 5th, Gomes de Freitas met by videoconference with the federal congressional delegation from Paraíba to sign the paperwork to resume the capacity and safety upgrade of BR-230, on the stretch between the Port of Cabedelo and João Pessoa, in Paraíba.
The paving of BR-426, linking Nova Olinda to Santana dos Garrotes, also in Paraíba, is in its final phase. The work, which involved an investment of BRL 12 million, is already 90% complete and is expected to be finished next month. Internally, the Ministry of Infrastructure is celebrating the delivery of 12 works since the arrival of the pandemic alone and highlights the advanced stage of other major projects. Infrastructure works, in which federal government investment is still predominant given the scale of the projects, become crucial for the country’s development (a scenario which, despite interventionist ghosts within the government itself, may have its days numbered), especially to resume activity after the devastation caused by the new coronavirus. May the tracks leading us out of a gloomy future soon be paved. With or without masks.
Report by Victor Irajá, originally published by Veja Magazine (in Portuguese), on 05/10/2020.
