Monday, April 14, 2014

Brazilian Megaprojects See Megaproblems

One example, a massive rail project:
The Transnordestina, a railroad begun in 2006 here in northeast Brazil, illustrates some of the pitfalls plaguing projects big and small. Scheduled to be finished in 2010 at a cost of about $1.8 billion, the railroad, designed to stretch more than 1,000 miles, is now expected to cost at least $3.2 billion, with most financing from state banks. Officials say it should be completed around 2016.
But with work sites abandoned because of audits and other setbacks months ago in and around Paulistana, a town in Piauí, one of Brazil’s poorest states, even that timeline seems optimistic. Long stretches where freight trains were already supposed to be running stand deserted. Wiry vaqueiros, or cowboys, herd cattle in the shadow of ghostly railroad bridges that tower 150 feet above parched valleys.“Thieves are pillaging metal from the work sites,” said Adailton Vieira da Silva, 42, an electrician who labored with thousands of others before work halted last year. “Now there are just these bridges left in the middle of nowhere.”
Brazil’s transportation minister, César Borges, expressed exasperation with the delays in finishing the railroad, which is needed to transport soybean harvests to port. He listed the bureaucracies that delay projects like the Transnordestina: the Federal Court of Accounts; the Office of the Comptroller General; an environmental protection agency; an institute protecting archaeological patrimony; agencies protecting the rights of indigenous peoples and descendants of escaped slaves; and the Public Ministry, a body of independent prosecutors.
Still, Mr. Borges insisted, “Projects get delayed in countries around the world, not just Brazil.”
Mr. da Silva, who oversaw the start of work on the Transnordestina eight years ago, was frank about the role of his Workers Party, once the opposition in Brazil’s National Congress, in creating such delays. “We created a machinery, an oversight machinery, that is the biggest oversight machinery in the world,” he said, explaining how his party helped create a labyrinthine system of audits and environmental controls before he and Ms. Rousseff were elected.
“When you’re in the opposition, you want to create difficulties for those that are in the administration,” Mr. da Silva said. “But we forget that maybe one day we’ll take office.”
Another example, wind farms that are constructed, but their transmission lines are not.  The hot money flows into China, India and Brazil during the recent developing market boom hit countries ill-prepared to deal with such projects.  It is hard to overestimate the massive amounts of wasteful spending.  I think we'll be looking at a long slowdown in these markets, and that should puncture most commodity markets.

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