Faster routes needed for Brazil’s infrastructure
Continued economic growth is under threat from a backlog in infrastructure development. Obstacles to foreign and domestic financing of the sector urgently need to be overcome. Rob Dwyer reports.
CHANG YUNBO IS faced with an investment-risk problem. He is deputy general manager, overseas department, of China Communications Construction Company (CCCC), which is ranked 224 in the Global 500 companies, has plenty of capital and has vast experience worldwide of building infrastructure projects. The Chinese government has mandated his state-owned company to grow its portfolio of foreign projects aggressively in the next few years. When Yunbo scans the globe for construction project opportunities, Brazil looks ideal: the country badly needs infrastructure development, offers access to natural resources that are strategically important to China and has a growing economy with strong fundamentals.
The problem is that CCCC and other Chinese construction companies do not want to hold the performance risk of what are often big infrastructure projects alone. They want to use capital in the building phase and share or pass the performance risk through intra-government agreements – the government-to-government (G2G) model. CCCC has successfully used this structure in Africa and elsewhere. So when Yunbo addressed a recent Sino-Brazilian investment forum in Beijing he outlined his frustration that the G2G model could not be applied in Brazil, and then appealed for new models that will enable Chinese companies to put their resources to work in Brazil.