President Luiz Inácio Lula da Silva on Friday rolled out a $350 billion infrastructure investment program designed to boost Brazil’s economy and kick-start a green transition.
Most of the amount – $264 billion – will be invested through 2026. The leftist leader and his allies have pitched the plan as a Brazilian version of laws backed by President Joe Biden that sought to stimulate the U.S. economy with roughly $1 trillion in new infrastructure projects and clean energy initiatives.
The proposal carries the same name of an investment plan Lula created in 2007, during his previous presidency – Growth Acceleration Plan, or PAC.
This time, however, Lula’s government says it will pay special attention to his environmental agenda and campaign promises to prioritize sustainable economic development.
It will rely on a mix of federal funds, concessions and public-private partnerships to help finance a combination of transportation, sanitation and ecological transition projects. About $220 billion will come from public funds, with the private sector kicking in an additional $125 billion, according to a Friday statement.
Energy transition projects will receive a total of $110 billion.
Finance Minister Fernando Haddad said elements of the PAC plan are part of a larger effort to begin an “ecological transformation” of Brazil’s economy that will include new regulations for carbon markets and the issuance of green bonds. The government is preparing to hold the country’s first sustainable bond sale later this year.
The suite of proposals will make Brazil more attractive to investors while also balancing Lula’s environmental goals and efforts to reduce poverty, Haddad said at an event to announce the plan in Rio de Janeiro.
“Our plan cannot and will not be the same as those of developed countries,” he said. “The profile of emissions is different, which justifies a different strategy. And the challenge of overcoming poverty in a country still marked by profound social inequality is just as important as the environmental challenge.”
The government estimates it will create 4 million jobs, Chief of Staff Rui Costa said at the event.
Brazil’s state-controlled oil company, Petroleo Brasileiro, will contribute $66 billion, chief executive officer Jean Paul Prates said. The oil giant, which played a prominent role in the original program, has a $78-billion, five-year strategic plan and is mulling an increase for the period between 2024 and 2028. It plans to earmark as much as 15% of its total investments for low-carbon projects.
The New Development Bank – an institution created by the BRICS bloc of emerging market nations that includes Brazil – will contribute $2.7 billion in financing for sustainable projects, said Aloizio Mercadante, the head of Brazil’s national development bank.
The previous Growth Acceleration Plan helped increase public investment under Lula and his successor, former president Dilma Rousseff, who now heads the New Development Bank. It led to the construction of hundreds of highways, bridges, hydroelectric projects, refineries, and transmission lines.
But many of its projects, which were handled by large local infrastructure companies, later faced investigations over corruption allegations. The program helped lead to the rise of Operation Car Wash, the years-long corruption probe that put hundreds of business and political leaders – including Lula, temporarily – behind bars.
Others drew backlash over their environmental impact. The PAC program financed the construction oil refineries, like a major petrochemical complex in Rio de Janeiro, and the Belo Monte dam, a hydroelectric project in the Amazon rainforest region that drew fierce opposition from Indigenous tribes and environmentalists.
The PAC’s legacy may create challenges for the new program. The corruption investigations drove many of the involved companies into bankruptcy. The ensuing end of an era of massive public investment, meanwhile, hit firms that hadn’t been implicated, often resulting in large debts, layoffs and legal disputes.
As a result, the government will have to carry out large projects without many of the major contractors that delivered them in the past.