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Infrastructure in the Northeast: The Challenges

Photo: Programa de Aceleração do Crescimento PAC

Monday, February 6, 2012

While infrastructure projects in Brazil’s northeast offer potential for economic growth and job creation, they also present challenges. Lawsuits, cost overruns, construction delays, and licensing disputes are some of the issues that can slow the progress of developments.

One of the largest infrastructure projects in the region, the transposition of the São Francisco River, is a case in point. The $3.95 billion project aims to bring water to 390 cities in four northeastern states by 2025 through the use of canals. Construction began in 2007, but part of the project stopped in 2011 due to a number of factors, including disputes over contracts and licensing, as well as over 1,000 lawsuits brought by residents who would be displaced by the canals. With construction at a standstill in previous “boom” areas, thousands of jobs vanished, dealing a blow to local economies, especially motels and restaurants.

The Transnordestina, a nearly 2,000 kilometer-long railway line connecting the states of Alagoas, Ceará, Pernambuco, and Piauí, experienced similar problems. In December 2011, administrators said the project would need an additional $755 million, raising the total cost of the project to $3.89 billion. Contract disputes and delays in expropriating land in the railroad route caused over a year of suspended construction from 2010 to 2011. In addition, residents of expropriated areas brought over 1,900 lawsuits against the project, which, at this stage, is due for completion in 2014.

There are also issues with supply and demand. In 2009, because of a surge in demand, companies ran out of asphalt in Piauí state, causing delays in at least four federal highway projects. According to a November report in the Diário do Nordeste, a shortage of qualified engineers to design and plan highway projects also causes delays and degrades the quality of roads. Furthermore, because waves of workers began leaving Brazil’s southern cities and returning home to the northeast for job opportunities, there is now a shortage of qualified construction workers in São Paulo state, the country’s industrial center.

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Rachel Glickhouse is the editorial associate at AS/COA Online.