Analysis: Next hurdles for Brazil: sticky fingers, red tape

Fri Aug 17, 2012 11:24am EDT
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By Brian Winter and Leonardo Goy

BRASILIA (Reuters) - The ministry overseeing Brazil's new $66 billion infrastructure plan was also ground zero for a spectacular corruption scandal last year in which officials allegedly demanded 5 percent kickbacks on highway construction projects and then pushed carts down the hallways to hand out the cash.

The transport minister and most of his staff resigned or were fired in July of last year, and a new, supposedly more scrupulous group is now in charge.

Yet the incident helps illustrate why President Dilma Rousseff's plan to involve the private sector in more public works projects is not a cure-all - and why she still must make major inroads against graft, red tape and other obstacles in order to succeed.

Senior officials told Reuters they realize deep changes are needed in order to attract foreign capital - especially from companies that were scared off in the past by corruption and cost overruns. While there do not seem to be any truly game-changing reforms in the pipeline, the officials did outline some initiatives aimed at increasing transparency and efficiency - and making the Brazilian government a less onerous partner.

"I think this government, of Dilma Rousseff, has clearly shown that it is not going to tolerate corruption," Transport Minister Paulo Passos, a bespectacled career technocrat who assumed the job after last year's purge, said in an interview.

"What happened here is one sign of that," he added with a faint smile.

Rousseff hopes the infrastructure plan, unveiled on Wednesday, will revolutionize Brazil's decrepit highway and railway system. She is also betting it will provide a boost to an economy that has barely grown during the past year, and is struggling to upgrade its infrastructure before hosting the 2014 World Cup and the 2016 Summer Olympics.

The initiative marks a major shift from practices over the past decade in which successive left-leaning governments oversaw planning, execution and maintenance of most infrastructure projects. Under the new scheme, which some have labeled a privatization, businesses will be responsible for most aspects of building or improving about 4,500 miles of highways and 6,200 miles of railroads.   Continued...