Brazilian President Luis Inacio Lula da Silva unveiled a plan to spend 200 trillion reais and nearly $180 billion (about XNUMX billion euros) on infrastructure, energy and transportation over the next four years, part of his larger effort to boost economic growth and jobs in the country's largest country of Latin America.
The Growth Acceleration Program, known by its Portuguese acronym PAC, has met with skepticism from analysts and investors who say previous, similarly ambitious programs have included projects that never saw the light of day and opened the door to massive corruption abuses.
Money from this year's PAC is expected to go toward infrastructure projects including new highways and ports, as well as energy efficiency and slum urbanization programs.
"More than a portfolio of public investments, the new PAC is a collective compromise (...) born of many conversations with governors and mayors," Lula said Friday at a gathering in Rio de Janeiro attended by ministers, state governors and the private sector. This will ensure that the selected projects "reflect the specific needs of each region in the country," he added.
The government has not said how it will fund the nearly $200 billion, but it will have to do so when it sends its final proposed budget to Congress by Aug. 31. The plan then needs to be approved by Congress and included in the annual budget for 2024 in December.
Lula launched the first PAC in 2007, shortly after becoming president for the second time. It included a package of investments in infrastructure, apartments and highways, as well as easier access to bank loans.
The new plan is praised by members of Lula's administration, who say that public investment is needed to stimulate economic growth.
Finance Minister Fernando Haddad this Sunday called the last ten years in Brazil a "tragic decade" pointing to the country's slow growth. "We cannot continue to grow at an average of one percent a year, which has been happening in Brazil for a decade," Haddad said.
"It's a very ambitious program," said Gilberto Braga, professor of finance at Ibmec University in Rio de Janeiro. "It has to do with the political goals of the Government, creating the legacy of (Lula's) third term as one of the great works, great achievements, of a greater Brazil".
Investors in Brazil have always been skeptical of Lula's leftist Workers' Party's commitment to fiscal restraint. In addition, critics say too many projects included in previous PACs have been abandoned or left unfinished. In their opinion, public money is being spent too much in the wrong areas or wasted on poorly executed projects.
"These are very large numbers for a country that does not have good management of the use of public resources," Zeina Latif, an economist at the consulting firm Gibraltar, said in a telephone interview. "In Brazil, we have a poor record of investment quality".
Government officials say unfinished infrastructure projects will be prioritized, mostly around slums, which will receive the bulk of investments under the PAC. This includes launching new, affordable housing programs and investing in sanitation and flood prevention in slum areas.
The second largest investment includes energy efficiency and energy transition. But while Lula and other government officials have said the country will increase investment in renewable energy and the use of natural resources, state-controlled oil giant Petrobras will receive most of the energy investment.
Petrobras President Jean-Paul Prates told a rally in Rio on Friday that the company is working on an energy transition to produce biodiesel, even as it battles with the Environmental Protection Agency, which has refused to give it permission for a controversial oil drilling project. at the mouth of the Amazon River.
Petrobras was also among the Brazilian companies behind the 2014 corruption scandal known as Operation Car Wash, which revealed a wide-ranging corruption scheme involving top businessmen and high-ranking politicians.
Brazilian officials estimate that, including private-sector-led initiatives and private-public partnerships, total investment over the next four years could reach 1,7 trillion reais (about $350 billion), raising the eyebrows of investors and analysts.
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