Brazil president’s infrastructure plan to fund power projects

Brazil President Luiz Inacio Lula da Silva unveiled a plan January 22 that aims to speed economic growth in Latin America’s largest country by steering cash into long-delayed infrastructure projects such as roads and power plants.

Under the 503.9 billion real (US$237 billion) program, the central government would chip in just 67.8 billion reais (US$31.8 billion) for investments over four years.

The rest, 436.1 billion reais (US$204.7 million), would come from state-run companies and the private sector, which the government hopes to woo with tax breaks. The tax benefits would be 6.6 billion reais (US3.1 billion) this year and 11.5 billion reais (US$5.4 billion) in 2008.

Lula, whose second term started this month, will need broad political support in a fractured Congress for the plan to take root.

“The challenge now is to accelerate the growth of the economy,” Lula said. The plan would uphold commitments to fiscal prudence, inflation control, and stability, he said.

In November, shortly after Lula’s re-election victory, a senior Environment Ministry official said Lula planned to hire more people and modify environmental laws to force through 120 stalled infrastructure projects in his second term. (HNN 11/22/06) Ministry Executive Secretary Claudio Langoni said about 20 transportation projects were on the president’s list while the rest were pipelines, hydroelectric dams, and other energy projects.

The new program bets the private sector, which frequently complains about an unfavorable business climate, will jump on board and invest 270 billion reais (US$126.7 billion) to make it a success.

Business leaders said the plan for energy, transportation, sanitation, and housing was a step in the right direction but that the government could pave the way for faster growth by cutting its bloated budget in other areas.

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