Lula Unveils Major Infrastructure Investment Plan

In a move that could bolster the electoral chances of his chosen political heir, Brazilian President Luiz Inácio Lula da Silva announced a massive infrastructure investment program this week. The plan—valued at roughly $880 billion—will be the second stage of the Growth Acceleration Program and is known by its Portuguese acronym as PAC 2. Lula unveiled the plan at a meeting with 1,200 people and his hoped-for successor Dilma Rousseff in attendance. Rousseff’s administration would carry out the project should she win the October elections. She steps down from her post as Lula’s chief of staff this week to focus on the race as the governing Workers’ Party candidate. But even though Lula’s approval rating has hit a record 76 percent, Rousseff trails São Paulo Governor José Serra in electoral polling.

The Lula administrations views PAC 2 as a way to build on a rising economy and coincides with a growing sense that Brazil’s time has come. Even though Brazil’s economy contracted by 0.2 percent last year, recovery led to a 4 percent growth in the fourth quarter and the Brazilian Finance Ministry predicts GDP growth could run as high as 5.7 percent in 2010. Infrastructure development is described as an engine to boost that growth, with the Ministry describing PAC 2 as the cornerstone. The project involves $534 billion in investment funds to be released between 2011 and 2014, and the remainder after that point. The largest portion of funds will go to the energy sector followed by subsidized housing and transportation as well as investment in social inclusion, sanitation, and urban infrastructure. The World Bank’s Growth and Crisis blog offers a breakdown of areas of investment.

The infrastructure plan continues some projects of the original PAC that was announced by Rousseff in 2007, prompting Lula to call her “the mother of PAC.” Rousseff says more than half PAC projects have been concluded and some 90 percent are in process. But some critics say the lack of detailed information about PAC’ programmatic progress raises suspicions about the completion of projects. Moreover, others questioned the timing of the PAC 2. “This is a purely political move,” Bolivar Lamounier, a partner at Sao Paulo-based Augurium Consultoria told Bloomberg, saying the announcement was timed to help Rousseff’s candidacy.

But Rousseff argues that the projects would continue social and economic development in Brazil. With poverty reduction rising during the Lula administration, http://brazil.foreignpolicyblogs.com/tag/poverty/ the country’s economic growth has contributed to his popularity. As The Wall Street Journal reports: “In a recent write-in poll, Brazilian voters had a clear favorite to be their next president come election time in October: Luiz Inácio Lula da Silva.” Lula hopes this popularity carries over to the voting booth for Rousseff come October. But a Datafolha poll published Monday found that a gap that had previously shrunk between her and Serra had widened again; he leads with 36 percent support compared to her 27 percent. The São Paulo governor intends to resign April 2 to officially begin his candidacy.

The race may get more competitive: Brazilian Center Bank head Henrique Meirelles informed Lula, who asked him to remain in his post, that he may step down by March 31 to become a candidate.

Learn more:

• Government of Brazil's web page providing an overview of PAC 2.
• Brazilian Ministry of Finance March 11 report on projected GDP growth.
• Financial Times “Building BRICS” multimedia page includes ongoing business coverage of Brazil along with Russia, India, and China.
• The World Bank’s Growth and Crisis blog’s PAC 2 investment breakdown.
• Datafolha presidential poll from March 29, 2010.