The largest economy in Latin America is aiming to build a transformative post-pandemic infrastructure with investments in technology and green energy, representing opportunities for U.S. companies.

On October 4, Brazil’s Infrastructure Minister Tarcisio de Freitas arrived in New York City for a series of meetings, during which he presented some of Brazil’s infrastructure portfolio to potential investors. Part of the Brazilian government’s effort to build a transformative post-pandemic national infrastructure is to attract private capital and privatize some infrastructure elements. 

Just in the upcoming month and a half, the government plans on auctioning off 13 assets and raise over $5 billion. By the end of next year, the government will have raised a projected $45 billion through infrastructure auctions. Regulatory changes at the federal and state levels are designed to attract private capital to enhance Brazil’s infrastructure, including the railroad, airport, and energy sectors.

The picture that emerges explains why the United States International Trade Administration (ITA) described infrastructure as “a best prospect industry sector” for Brazil. It’s also why the U.S. Trade and Development Agency recently announced funding for early-stage developments in several of Brazil’s infrastructure sectors, which it believes will blossom into projects that will benefit U.S. exporters. 

The rosy possibilities reflected in the ITA’s assessment have emerged only recently. Infrastructure investments had been suffering in Brazil since before the arrival of COVID-19. According to Statista, a provider of market data, investments in Brazil’s infrastructure reached a decade-low in 2020 of $23 billion, down from the 2014 high of $35 billion. Pre-pandemic years did not fare much better: 2019 saw $24 billion in investments.

As Brazil’s dams run dry, it needs more than green energy to thrive
As Brazil’s dams run dry, it needs more than green energy to thrive

Brazil’s Economy Fares Better

According to the International Monetary Fund (IMF), Brazil’s economy has fared better than others in Latin America during the pandemic, thanks largely to a robust government response to the virus. In 2020, the government promulgated “one of the biggest stimulus packages in emerging markets,” said an IMF report, “nearly 4% of GDP in emergency cash transfers alone in 2020.” According to a report from Deloitte, the government’s recovery and infrastructure programs will total as much as 15% of GDP, or around $276 billion. 

Economic growth is projected to rebound to 5.3% in 2021, after a 2020 contraction of 6.8%, according to the IMF, benefitting from price increases for Brazil’s commodities exports. According to the Deloitte report, upticks in the prices of soybeans, iron ore, and oil have “likely aided Brazil’s overall GDP growth.”

The infrastructure policies being pursued by the government of Brazil reflect many of the priorities proposed in a recent economic survey from the Economic Commission for Latin America and the Caribbean (ECLAC). As explained by ECLAC’s executive secretary, Alicia Bárcena, the region needs “policies for a transformative recovery with an emphasis on investment,” including “industrial policies and technologies to drive growth in sectors that are more technology intensive.” That also means “promoting new development patterns that reduce environmental footprints, such as transitioning towards renewable energy, sustainable mobility in cities, and digitalizing industrial processes.”

“The immense disruption from the pandemic may lay the groundwork for higher productivity through economic restructuring and digitization,” noted a recent World Bank report. In other words, echoing the rhetoric currently in favor in some quarters of Washington, D.C., Brazil is attempting to build back better from the pandemic’s devastation.

In the electricity sector, recent developments show that Brazil’s regulators are seeking to promote a higher proportion of green energy in the nation’s electricity generation mix. The Brazilian Electricity Regulatory Agency (in Portuguese, Agência Nacional de Energia Elétrica, or ANEEL) recently authorized 14 additional generating units to start commercial operations at the Chafariz wind complex, in Santa Luzia, Paraíba state, representing 48.5 megawatts of additional capacity for the national grid. ANEEL also gave the green light for the start of tests at the Juazeiro Solar VII PV solar power plant in Juazeiro, Bahia, totaling 47.3 megawatts. Three other smaller wind and thermoelectric operations were also recently approved, totaling around 12.5 megawatts of capacity.

USTDA and Brazil’s Infrastructure Projects

The U.S. Trade and Development Agency (USTDA) recently awarded a grant to the Brazilian Association of Electricity Distributors (ABRADEE) that will provide technical assistance to enable large-scale smart grid deployment throughout Brazil. ABRADEE represents 41 private and public electric distribution companies in Brazil, serving over 99% of Brazilian consumers. 

USTDA’s purpose is to connect U.S. private-sector companies to infrastructure projects in emerging markets. The agency says that it generates $121 in U.S. exports for every dollar it invests.

ABRADEE will use the USTDA funding to assess public policies and economic regulations, with an eye towards facilitating investments and encouraging the modernization of electricity distribution networks. 

The USTDA grant will allow Brazilian electricity distributors, said Marcos Madureira, president of ABRADEE, to learn “how the United States has developed smart grids and regulatory best practices.” It also represents “an opportunity to collaborate with U.S. industry” and “will allow us to anticipate potential challenges and identify solutions that will work for Brazil.”

“Ultimately,” said Enoh Ebong, USTDA’s acting director, “this effort will help transform how electricity is distributed to the majority of Brazil’s consumers.”

In the transportation sector, USTDA-funded technical assistance for Brazil’s National Association of Passenger Rail Operators (Associação Nacional dos Transportadores de Passageiros sobre Trilhos, or ANPTrilhos), announced in September, will help ANPTrilhos in its efforts to assess energy efficiency solutions such as energy storage and automation software that will reduce emissions and costs and improve energy efficiency across its rail systems. 

Two USTDA grants to ANTPtrilhos announced earlier this year are funding the development of two technical assistance plans, one for energy efficiency and the other for enterprise asset management. “U.S. companies offer world-leading solutions in this space and are eager to partner with Brazil as it continues transforming its rail infrastructure,” said Ebong. 

Brazil’s passenger rail operators are prioritizing solutions that will reduce costs and improve energy efficiency, according to Ebong. “The recent expansion of Brazil’s passenger rail systems has increased the need for more efficient management of rail assets,” she added. “USTDA’s assistance will help rail operators plan and implement information and communications technology investments to optimize the maintenance of those systems and to identify energy efficiency solutions.”

ANPTrilhos’ cooperation with USTDA on asset and energy management, efficiency improvements, and cost reductions, said Joubert Flores, CEO of ANPTrilhos will “prepare Brazil’s passenger rail systems for a faster recovery after the COVID-19 pandemic.”

USTDA also recently granted funding to São Paulo’s public rail operator, Companhia Paulista de Trens Metropolitanos (CPTM), for a feasibility study to optimize the flow of its three-million daily passengers using information and communications technology solutions. “Rail operators around the world are turning to big data analytics, artificial intelligence, and the Internet of Things to improve operational efficiency,” said Ebong. “USTDA’s assistance will utilize U.S. private sector expertise to help CPTM navigate a complicated field of options and to identify solutions.”

CPTM will use USTDA’s assistance to develop a plan that will identify and implement information and communications technologies to transform the carrier’s infrastructure. The technologies will help CPTM identify risks, analyze travel demands, and reduce traffic congestion and greenhouse gas emissions.

Brazil’s Airport Privatization

The privatization of Brazil’s airports, which has been ongoing since 2012, represents another opportunity for U.S. companies, according to the ITA. While 23 of the country’s largest airports have already been privatized, 53 regional airports are now undergoing the same process. “Brazil has recently concluded a round of airport concessions,” a recent ITA report noted, “that signals exciting opportunities for U.S. companies interested in participating in the expansion of the country’s system of airports.”

The Brazilian Civil Aviation Secretariat (SAC) predicts that the domestic travel segment will increase by 200% over the next 20 years from its current 107 million passengers per year. “The airport concession program presents a remarkable opportunity for U.S. suppliers of airport products and services,” said the ITA report. The ITA estimates that the 53 airports will require over $440 million in investments over the next decade.

“Despite the big crisis facing the airline industry due to the coronavirus,” the report added, “experts see appetite from investors for regional airports. After the end of this health crisis, it is expected the public will tend to opt for short-range trips or travel by private jets, which are served by regional airports.” Opportunities for U.S. companies flowing from the privatization of Brazil’s regional airports include providing docking systems, baggage systems, a range of safety and security equipment, such as x-ray machines, and design, integration, and consultancy services.

As is the case elsewhere, the future of Brazil’s economy in the near term will depend on its success in combating the spread of the COVID-19 pandemic. In that regard, “Brazil’s economy is likely to have benefitted from a rise in the pace of COVID-19 vaccinations,” noted Akrur Barua, a Deloitte manager, “with the number of new cases declining steadily since the end of June.” As of the end of September, according to published reports, 42% of Brazil’s population had been fully vaccinated, up from just 12% in June, and 70% has received at least one vaccine dose. 

Besides that good news, Barua added, “a healthy economic boost” to Brazil will likely come from reforms in taxation and administration, as well as from programs designed to increase foreign investment.