But anyone hoping for quick fixes will be disappointed. Analysts say fine-tuning of concessions is needed to ensure returns are attractive for the private sector. Mr. Savaris of Credit Suisse says real returns on airport concessions announced in February amounted to 2-3 per cent for some investors. The government is reportedly seeking to lower real returns on new highway concessions to about 6 per cent but investors want a minimum of 10 per cent.
There are concerns about the structure of the railway deals, which gives state-owned network operator Valec the right to purchase all the track capacity in the new concessions. “The private sector wasn’t happy – usually one company is responsible for both construction and operation,” says Mr. Savaris.
Brazil must also be wary of focusing on form over substance. The government is persisting with plans for a bullet train between Sao Paulo and Rio with a reported price tag of $29-billion and echoes of Chinese-style largesse. Brazil has had white elephants before. Some projects related to Rio’s 2007 Pan American Games came in at 10 times initial cost estimates, and play at a baseball stadium was suspended because of shoddy construction, says Larry Rohter, author of Brazil on the Rise. Building capacity is already strained, with a shortage of skilled labour, engineers, architects and equipment driving up prices.
Other hurdles are less tangible. They include ideological resistance to privatization from the ruling coalition, which is led by Ms. Rousseff’s centre-left Workers’ party; and opposition from those living in the way of infrastructure projects, such as Mr. Guimaraes in Rio. Activists say thousands of residents are being moved to make way for projects related to the World Cup and the Olympics.
Mr. Guimaraes sums up how little trust some have in the system. He says he does not believe government claims that it wants his land for public projects, pointing instead to condominiums he expects to be built in the Autodromo after the Olympics. His favela has a waterfront view potentially worth millions of dollars.
“Even if the government offers 500-square-metre apartments in another place, I still don’t want it. I want to live here in my community,” he says.Report Typo/Error