Brazil launches US$350bn federal investment juggernaut

Brazil’s federal investment program (PAC) is expected to unleash 1.7tn reais (US$354bn), 1.4tn reais of which will be spent by 2026, when President Luiz Inácio Lula da Silva's term ends.

The investments will materialize through public spending, including from state companies, and concessions and PPPs.

“The government is proposing a good challenge for all players. The most relevant message I see with PAC is that the government is saying that it does not want to do everything alone and is looking for private sector partnerships, with concessions and PPPs,” Roberto Guimarães, planning and economic director at industry and infrastructure association Abdib, told BNamericas.

The program is aimed at boosting the economy and gaining support ahead of the 2026 election.

An earlier version of the PAC focused heavily on public spending and was implemented during Lula’s terms from 2003 to 2011.

“I have controlled optimism with the announcement of the new PAC because although not all investments of similar past programs materialized, this time the regulatory environment is much more solid, increasing the chances of the progress of projects,” Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.  

The government aims to spend 371bn reais and state firms such as oil company Petrobras 343bn reais, while financing should reach 362bn reais and private sector spending, including concessions, 612bn reais.

“The question of financing included in the list shows that [development bank] BNDES will play a key role in this program, not least because we don’t really have financing mechanisms available to meet such a projection and investments in such long-term projects,” said Dantas.

Some of the program’s main areas are transport, energy transition and sustainable cities.

“Projects related to the energy transition will attract more attention from private investors. Brazil's energy matrix is considered cheap by international standards and the government understands this situation and is trying to attract investments,” João Cortez, a partner at infrastructure advisory Vallya, told BNamericas.

SECTOR INVESTMENTS 

Around 610bn reais were earmarked for sustainable cities.

“In order for cities to adapt to climate change and offer better quality of life, the axis of sustainable and resilient cities will build new housing through Minha Casa Minha Vida and finance the acquisition of real estate,” the government said in a statement.

“The New PAC will also invest in the modernization of urban mobility in a sustainable way, in urbanization of slums, sanitary sewage, solid waste management and containment of slopes and fighting floods,” it added. 

Transportation, encompassing highways, ports, rails, airports and waterways, will get 349bn reais, while 540bn reais are for energy transition-related investments.

“Through the Light for All program, the new PAC will universalize service in the northeast and anticipate the universalization of isolated communities in the Amazon. Investments in the pre-salt layer will expand production capacity for derivatives and low-carbon fuels in Brazil,” the government said.

Most projects in the PAC were previously announced.

“There is no relevant novelty in terms of projects, the great merit of the PAC is that they managed to organize in a single place those most relevant projects,” said Cortez.

Projects in Rio de Janeiro should get 343bn reais, in São Paulo 180bn reais and in Minas Gerais 172bn reais.

All projects included in the PAC are listed here.