- The Washington Times - Tuesday, July 31, 2007

RIO DE JANEIRO — Aviation chaos, unpaved highways and the threat of energy rationing point to perhaps Brazil‘s greatest challenge in its quest to become an economic superpower: how to upgrade its overburdened infrastructure.

The government is planning to spend billions of dollars in coming years to modernize and expand strained roads, power plants and ports in a bid to accelerate growth in South America’s largest economy.

But decades of infrastructure neglect, capped by years of economic instability in the wake of the Latin American debt crisis of the 1980s, will not be quickly remedied. The strain, in some cases, is having disastrous consequences.

The horrific airline crash at a Sao Paulo domestic airport earlier this month, in which 199 persons died, and a radar outage over the Amazon days later brought international attention to issues for years plaguing the country’s aviation system — precarious radar coverage, poorly trained air-traffic controllers and antiquated runways ill-equipped to handle modern jumbo jets.

The aviation woes show “in a dramatic fashion the extent to which growing infrastructure and energy bottlenecks constitute one of the government’s top policy challenges,” said Christopher Garman, the Latin America director for Eurasia Group, a political-risk consulting firm.

“These type of problems can fester for a long time, but when it hits, it hits,” he said.

A nation of 187 million rich in natural resources, Brazil is often cited — along with Russia, India and China — as a primary challenger to the United States’ economic dominance in the coming decades.

But Brazil’s gross domestic product grew by an unimpressive 4.2 percent in the first quarter of 2007, with analysts pointing to a balky infrastructure as one of the main culprits. Meanwhile, in a pattern that has become familiar in recent years, China’s grew by 10.4 percent, India’s by 8.4 percent and Russia’s by 6.3 percent in the same period.

In an attempt to remedy the situation, the government revealed in January a huge “Growth Acceleration Project.” Known by its Portuguese acronym PAC, the program calls for spending approximately $252 billion over the next four years on transportation, energy and ports.

So far, however, little if any of that money has been spent, largely because of the country’s bureaucracy and regulatory morass, with environmental authorities slow to approve plans and squabbling over the bidding process.

Meanwhile, the country’s infrastructure languishes. Many of Brazil’s highways have yet to be paved, and those that are often suffer from crater-sized potholes.

There is no national railway system, so goods must be moved in trucks, which line up for miles outside the nation’s ports.

But the most serious problem may lie in the electricity sector.

Most analysts predict Brazil will have to resort to energy rationing as it did in 2001 if new power plants do not come on line soon.

An energy crisis that rocked the country in 2001 was widely thought to have sunk the previous government’s chance of re-election and helped elect Luiz Inacio Lula da Silva, a former union activist and the country’s first working-class president, in 2002.

A study released last week by the Acende Brasil Institute, which is linked to the Brazilian Chamber of Electricity Investors, found that if the economy grows in line with projections of 4.8 percent annually, Brazil runs a 28 percent risk of having to ration energy in 2011.

Faster growth would only hasten the crisis, putting greater pressure on the president, who has seen his image damaged by last week’s crash in much the same way the response to Hurricane Katrina hurt President Bush.

Mr. Lula da Silva’s government has been roundly criticized for doing little to improve aviation safety, even after the crash over the Amazon in September of a Boeing 737 that exposed many of the system’s deficiencies.

Alexandre Barros, a political-risk consultant for the Early Warning institute in Brasilia, said the Sao Paulo accident will likely spur the government to open up to more private investment in infrastructure.

“Normally, governments only act in response to a crisis,” said Mr. Barros. “I think this will only increase the pressure for privatization and more public-private partnerships.”

But proponents of privatization will likely find stiff opposition in Mr. Lula da Silva’s own leftist Workers’ Party.

The president’s power base lies with the poor, and the government is loath to anger supporters with the kind of rate increases greater privatization could bring.

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