One of our readers wrote a comment recently that the expression “infrastructure of cambodia, prices of St. Tropez” was how his wealthy Russian friend described Brazil after a recent visit to Bahia. Although the comparison sounds somewhat exaggerated, we thought the expression was descriptive enough to become the title of a post to show how the “cambodian-style” infrastructure in Brazil is a drag in the economy. Hence, let us describe this issue by providing a simple example of a bottleneck on development: the railroad system.

A survey by the Brazilian National Confederation of Transport shows that the “turtle-speed” freight rail lines has been getting worse. Eight of the 13 railroad lines surveyed lost performance in 2010 when compared to 2009 (see below). The trains that carry products such as soy, corn and steel travel on average 25 km/h. When one thinks it can’t get worse… in Brazil, it does.

In Australia, for instance, the freight railroads are a priority for the central planners – the average travel speed is 61km/h… 2.5 times the speed of Brazil’s. According o Exame magazine, the Australian government estimates a gain of 10% to 15% in productivity by using railroads for transport instead of highways.

Now switching from railroads to the Brazilian highway system…
The road infrastructure in Brazil is simply awful, and the Brazilian productive sector gets severely punished since the cost of shipping has become one of the most expensive in the world… which makes the country less competitive in exports. In addition, each year about 37,000 people die in accidents in Brazil’s precarious highways. A large chunk of the investment resources allocated for the Brazilian roads ends up in the pockets of corrupt politicians. In the last year alone, by the government’s own accounts, at least R$700 million werediverted” from the Transport Ministry
If the government on its own computes R$700 million in corruption from the transport investment budget, should we triple that number to get a more realistic scenario of what goes on?

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