(Corrects 2013 committed investment figure to 80.3 billion
reais, not U.S. dollars)
By Alonso Soto and Luciana Otoni
BRASILIA, April 8 Brazil's presidential vote
will likely delay some investment decisions this year but
spending on infrastructure is expected to remain strong, a
senior government official told Reuters.
Although President Dilma Rousseff is the favorite to win the
Oct. 5 general election, many investors could withhold funds
until the next government outlines its plans for the following
four years, which could hamper the country's already slow
"It is obvious that businesses will delay some investments
until after the election to have more clarity," said the
official, who asked not to be named because he is not allowed to
"But investment in infrastructure will not be affected
because a lot of that construction is already under contract."
The official, who is involved in economic policy decisions,
said the government expects investment commitments of about 100
billion reais ($45.48 billion) between 2014 and 2015 in roads,
ports, airports, power generation and distribution projects.
That figure was close to 80.3 billion reais in 2013, most of
it on logistics and electricity projects.
Rousseff, a left-leaning technocrat, launched a multibillion
dollar infrastructure package in 2012 precisely to bolster
investment, which is one of the main bottlenecks holding back
the economy of the once-booming emerging-market star.
Investments in Brazil jumped 6.3 percent last year, but as
percentage of GDP it remains stuck at only 18 percent, which is
less than half of China's investment rate.
The central bank cited a sharp drop in investment as one of
the reasons it revised down its economic growth forecast to 2
percent in 2014 from 2.3 percent. The economy has expanded on
average about 2 percent per year since 2011, a far cry from the
4-percent growth rates of the past decade.
The political climate in Brazil is considered the biggest
deterrent for investment after high taxes and red tape in a
survey of foreign and local investors released in January by
international accounting firm KPMG.
The elections, in which governors and lawmakers will also be
elected, already had an impact on the value of local assets.
A drop in Rousseff's popularity in recent weeks helped spark
a rally in local stocks. The decline raised hopes among
investors that Brazil could see changes in policies that they
blame for destroying the market value of state companies and
undermining the economy.
The stagnation of investment in Brazil has more to do with a
series of business barriers known here as Custo Brasil or
"Brazil Cost," which includes high taxes, cumbersome red tape,
faulty infrastructure and scarcity of qualified labor.
"Potential investors are asking more questions about
political risk in Brazil since the drop in Rousseff's
popularity," said Maria Luisa Cravo, investment manager at
business promotion agency ApexBrasil.
But ultimately the most important factor holding back
investors is not politics but the difficulty of doing business
in Brazil, which is undermining the nation's ability to compete.
"There will be a downward trend in direct investment in the
next few years due to the Custo Brasil, rising interest rates
and the very high cost of labor," she said.
(Additional reporting by Anthony Boadle; Writing by Alonso
Soto; Editing by Lisa Shumaker)