According to the resource index for contributions, Grant Thornton consultancy indicated that nearly twice the percentage of Brazil GDP will be invested in infrastructure between 2011-2015.
Brazil could reach their target contributions of R$ 2.1 trillion in infrastructure investments within the next eight years. This finding comes from a study conducted by Grant Thornton, one of five large companies that provide global audit and investment consulting.
This is amount would represent an average investment in infrastructure and energy of 3.6 percent of the Gross Domestic Product (GDP) of Brazil per year, while taking into account an annual growth of approximately 3.0 percent each year through 2025. In-depth analysis on the subject can be found from Felipe Montoro Jens, an expert in Infrastructure Projects.
Jens points out that, according to World Bank data, the resource contributions index referenced by the Grant Thornton study would almost double the percentage of GDP invested in infrastructure between the years of 2011 and 2015. Furthermore, these investment estimates would reach more than two times the total amount invested in Brazil’s infrastructure from 2001-2015, which was approximately R$ 1 trillion.
Paul Funchal, member of the Transactions Area at Grant Thornton, emphasized: “It is essential that we arrive close to this value. Although the figure is large, it is not infeasible, imagining that the Brazil goes into a new cycle.” Funchal also added that, otherwise, the consequences faced by the country could be quite severe, including energy and electrical shortages (though currently this scenario does not have sufficient evidence to determine its actual probability).
However, according to Funchal, the recovery of the economy will significantly impact the efficacy of the proposed infrastructure investments. Partially because the recovery is influenced by a number of factors, including the lowest Selic rate in history (6.5 percent for the year); getting inflation under control (below 3.0 percent); proper management of the fiscal deficit; and related improvements such as the establishment of the new Long-Term Rate (TLP).
Jens highlights that, in later years, the country’s infrastructure has made a steady progression towards the private sector (most notably, livestock and housing), constituting nearly 70 percent of total investments in 2017. According to Jens, this is supplemented by foreign contributions coming largely from China.
The Oil and Gas Industry
According to the study conducted by consultant Grant Thornton, with an investment of R$ 2.1 trillion predicted by 2025, the oil and gas industry will account for almost 50 percent of the total value. The infrastructure expert, Felipe Montoro Jens explains that electrical energy will constitute R$ 361 billion; telecommunications at R$ 338.7 billion; sanitation at R$ 168.2 billion; and finally, local logistics at R$ 132.6 billion and port logistics at approximately R$ 51.3 billion.
Opportunities Created According to Felipe Montoro Jens
According to a study by French insurance company Coface, as quoted by Grant Thornton, in the previous year, Brazil placed 114th in the world in relation to investments in infrastructure. However, Funchal seems to be optimistic that Brazil is sure to capitalize on the train investment in the infrastructure sector, an important factor in determining the ten largest world economies and crucial exporters of relevant commodities. ” “For Brazil to succeed at that time, economic conditions were never so positive,” said consulting firm Grant Thornton.
Also, from Funchal, the calls for infrastructure funded by low interest debentures will be significantly more important to both the finance the infrastructure sectors. With these loans, it is possible to achieve around R$ 15 billion in abstractions for the year to date, reports Felipe Montoro Jens. Funchal also concluded that these interest rates must remain low, to enable the long-term benefits and profitability of infrastructure funding in Brazil.
For more on Felipe Montoro Jens visit his official website here: http://www.felipemontorojens.com.br/
Or follow Felipe on Twitter: @felipemontoroj