The health crisis caused by the pandemic of Covid-19 it's serious. The time is to take care of people, especially the most vulnerable, and support and express sympathy for those who have lost loved ones.. However, we must start planning for Brazil during and after the pandemic. in the end, economic projections indicate that we are dealing with a war-like impact. infrastructure
The Director General of the International Monetary Fund (IMF), Kristalina Georgieva, presented a worrying scenario for the global economy: a retraction of 3% in 2020, ten times more pronounced than the crisis of 2008-2009, and probably a depression only comparable to the crisis of 1929, with a cumulative product loss of US$ 9 trillion by the end of this year.
No brazil, the projections are also worrying. World Bank and IMF estimates suggest a drop in 5% do PIB, with unemployment reaching 15% still in 2020. The World Trade Organization, led by Brazilian Roberto Azevedo, predicts a decline of up to 32% of international trade this year - the retraction was of 12% in 2009. Capital flow data is already beginning to show a capital flight from emerging and developing economies, with net outflows of US$ 100 billion between March and April. In front of a picture like this, the rebuilding effort must be immediate. What to do to ensure that we come out of this crisis better?
The vast majority of national authorities have launched emergency programs with large amounts of resources – among which the programs of some G20 countries stand out., which sums represent, average, 7% of the GDP of the group countries. Initially, the responses were to avoid a meltdown in the securities and credit markets, in addition to emergency measures to support workers and companies directly or indirectly affected. But there is a consensus that, once these emergency measures overcome the health crisis, proposals for the economy cannot, in scope and intensity, be smaller than the grand economic recovery plans that followed war situations – such as the Marshall Plan at the end of World War II.
Brazil is not, and it shouldn't be, exception in this complex picture. A war budget was set in Congress, which allowed the creation of supplementary resources for transfers to workers and families directly affected by the strike. The Central Bank and public banks expanded their support to threatened companies and financial institutions. The National Bank for Economic and Social Development (BNDES), especially, promoted a new support line for the health sector, with a large part associated with the transfer of PIS/PASEP to workers, working capital support for small and medium-sized businesses and extension of debt repayment terms. These initial steps need to be followed by planning and action for a long-term sustainable economy for the planet and humanity..
It is necessary to resume the investment, growth and jobs, and rebuild the economy on a sustainable basis. Such goals will require bold measures for at least two reasons.: the first because Brazil was already facing a situation of low growth, high unemployment and setbacks in social indicators before the Covid-19 crisis, and the second because the current international scenario suggests greater difficulty in attracting foreign investments. This situation indicates the need to immediately think about domestic mechanisms to increase investment, employment and production. How to make the post-pandemic recovery strategy compatible with the long-term Brazilian strategy – anchored in efforts to increase competitiveness, international insertion and attraction of foreign investments - demand rapid and responsible expansion of infrastructure investments.
Quality infrastructure: pillar of reconstruction
Brazil has been living with a crisis of public and private investments in social and economic infrastructure for many years. And since the decade of 1980 these investments have shrunk by more than 5% for just under 2% do PIB, which is insufficient even to cover depreciation. This low investment, in turn, translates into low productivity and competitiveness, but also in the low quality and coverage of fundamental public services – such as public transport, sanitation, connectivity and education and health structures. No extraordinary measures, the current crisis only tends to aggravate this trend..
The challenge is to invest more and better in sustainable or “quality” infrastructure – that is,, that maximize efficiency and economic and social impact, strengthen infrastructure governance, and build resilience against natural disasters and other hazards. Investing in infrastructure is crucial for recovery because of its multiplier effect. Estimates show that every 1% spending on infrastructure there is a return of up to 3% I'm PIB me 10 years old, and even 8% in 30 years old. If this infrastructure considers environmental criteria, climatic and social, it still enhances the effectiveness of the results. These are investments that represent the intelligent use of scarce public resources, that preserve the country's natural capital, and who have a greater chance of mobilizing private resources, nationals and internationals.
For that, it is first necessary to "densify" government capacity in planning, construction and supervision of infrastructure projects. This requires investing heavily in training - especially in states and municipalities -, use public and private institutions, and get support (and financing) national and multilateral to promote improvement in the quality of projects in states and municipalities. The ideal would also be to reproduce at the national level the projects that have already been successfully planned and implemented.
In this regard, Brazil does not need to invent the wheel: has technical capacity accumulated in public and private institutions, in its public banks and in a sophisticated private sector. And it has well-established relationships with multilateral and regional development institutions that could help with "project origination funds" and technical support. The question here is, therefore, transform these dispersed capacities into articulated mechanisms for promoting a national plan for investments in quality infrastructure.
In second place, try to maximize the supply of long-term financing, using limited public resources to mobilize private resources. It is important to note that Brazil has been wasting opportunities to mobilize resources in sustainable infrastructure for years. In 2019, the global issuance of green bonds was estimated at US$ 257,5 billion, a record compared to previous years. And the estimate is US$ 350 billions in 2020, most concentrated in Europe, North America and Asia Pacific, especially in China. Much of the rapid expansion of these markets has been due to corporate responsibility or mandates imposed by shareholders on major banks, institutional funds and investors. In China, Nonetheless, the government has made efforts to “green” your domestic financial markets: from 2016, China's local green bond market has expanded rapidly. With total issuance of US$ 60,9 billion in October 2018, China is now the world's second largest green bond market, after the European Union. demonstrably, Brazil has had positive international trends in this field, but it only reached a fraction of its potential..
An increase in the sustainable investment portfolio will offer more chances to actively mobilize resources. This effort requires expanding the number of technically reliable projects and using them to expand access to long-term multilateral and private credit. These efforts should be even more intense in new ventures with long-term maturities and uncertain returns, where attracting private equity requires the ability to adequately develop and finance projects.
A smart economy preserves natural resources
Preserving Brazilian biomes and other rich environmental services is not just an imperative for future generations on the planet, but also for a smart economy at the moment, because it respects the base of the economy that is our natural capital. Using this national asset wisely requires a clear vision and planning, proper regulatory framework, in addition to a project identification and structuring process that takes into account the demand for local public services and the need for well-established governance. in the meantime, considering the details and challenges of infrastructure deployment in the Amazon is mandatory in an infrastructure investment promotion agenda.
Brazil needs better infrastructure, suited to the needs of this continental economy, with large natural endowments and significant growth potential. Investments in sustainable or quality infrastructure are well positioned to generate business, jobs and demand needed to tackle the economic consequences of the current Covid-19 crisis. What the country urgently needs is to redirect attention to new procedures, review existing projects and align public institutions, private, and multilaterals to play complementary roles in improving project development and financing. This is a sure way to rebuild from the crisis., and build a better future, productive, competitive, resilient and inclusive.
original content wribrasil.org. For information, questions and suggestions for topics, contact us.