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Brazil wins the gold medal in gridlock

President Dilma Rousseff, seeking to modernize the country's transportation network, has sold three major state-owned airports to private interests.

April 07, 2012|By Vincent Bevins, Los Angeles Times
  • Traffic jams the center of Sao Paulo, Brazil, last year. Brazil's inadequate transportation network is beginning to drag on its economic boom.
Traffic jams the center of Sao Paulo, Brazil, last year. Brazil's… (Luiz Guarnieri, Agencia…)

SAO PAULO, Brazil — If you plan to fly somewhere in Brazil on a busy weekend, you'd better be prepared to wait. At some airports, up to a third of the flights can be canceled or delayed.

If you choose to drive, you'll sit in traffic. The 50-mile trip from Sao Paulo to nearby beaches for the Carnaval holiday this year took as long as five hours.

If you're counting on the planned bullet train between Sao Paulo and Rio de Janeiro, good luck with that. It won't be ready when Brazil hosts soccer's 2014 World Cup. In fact, the transportation minister said recently that it won't be operating until 2022, at the earliest.

And if you're a farmer, whose commodities are helping fuel Brazil's export boom, you'd better count on up to a third of your harvest falling out of trucks navigating bumpy old roads on the way to market. Then you might wait for days at overwhelmed ports to unload the rest.

Explosive growth has pulled 30 million Brazilians out of poverty in the last decade, propelling the nation to a position as the world's sixth-largest economy. Its up-and-coming global role will be highlighted when President Dilma Rousseff visits Washington this week.

But the country's transportation network is woefully lacking. Now, with the World Cup looming and Brazil preparing to host the Summer Olympics only two years later, Rousseff has launched an effort to modernize it, selling off three major state-owned airports to private interests.

Rousseff's party still balks at the word "privatization," with many officials asserting that the airport deal was only a "concession." That attitude is a reflection of a backlash across Latin America against U.S.-backed "neoliberal" free-market policies that dominated the region in the 1980s and '90s.

Analysts say pitiful infrastructure is keeping Brazil from even faster growth and that action is needed on the country's other transportation bottlenecks. But even limited privatization is a hard sell to unions and other hard-core supporters of Rousseff's Workers' Party. It's unclear how much further Rousseff, a former leftist rebel, might go.

"These are strategic national assets," said union leader Ubiraci Dantas de Oliveira. "And we have bad memories of previous privatizations."

Demonstrators gathered in early February in front of the Sao Paulo stock exchange, waving red flags as the airport in the capital, Brasilia, and two Sao Paulo-area airports, Guarulhos and Viracopos, were auctioned off. South African, French and Argentine companies are paying $14.2 billion for them, much more than Brazil was seeking.

By reaching out to the business community, Rousseff was using a strategy employed by her mentor and predecessor, Luiz Inacio Lula da Silva, a former union organizer who combined pragmatic, business-friendly policies with the traditional social goals of the left. He finished his second term in 2010 with sky-high approval ratings.

With Brazil expecting an influx of foreign visitors for the World Cup in two years, airports were the most pressing concern.

Even after the airport auction, Jerome Valcke, general secretary of FIFA, the world soccer authority, caused a scandal in Brazil by saying the country needed a "kick up the backside" to prepare for 2014.

Airport privatization "is a very big deal," said Tony Volpon, a New York-based economist for international bank Nomura Securities. "But the question is if this is a one-time thing, because of the World Cup, or if it is the beginning of a bigger movement that could be exported to other airports, roads and ports. Because there is so much that needs to be done."

Brazil needs up to a trillion dollars in infrastructure investment to reduce its production costs and ensure sustainable growth, said Jerome Booth, head of research at Ashmore Investment Management in London.

Signs of Brazil's infrastructure needs are everywhere.

On the way to the beach for Carnaval in February, Sao Paulo drivers had time to get out of their cars to chat or buy snacks from vendors in the middle of the freeway. City residents often say they won't even try leaving town on a busy weekend because the traffic is just too bad.

Farmers export more than $75 billion in commodities every year, much of it to Asia. But they say they could do even better — and the country would prosper even more — if it didn't take longer to transport their goods across Brazil than it does to get them from the port to China.

Rousseff took office promising to rein in her predecessor's spending, even while tackling problems in infrastructure, healthcare, education and safety.

As unsettling as the airport sales were to her base, she remains extremely popular.

"We criticize when we think she's committing an error," said Dantas de Oliveira, speaking at the union headquarters. "But we would never deny that she and Lula have represented huge steps forward for us."

Bevins is a special correspondent.

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