Economic crisis hits as Brazil builds

by Dave

 Los Angeles Times

[I]n recent weeks, the credit crunch has begun to affect plans near and dear to Lula’s heart, including a $250-billion Growth Acceleration Program in partnership with private industry. The plan was designed to make up for a 25-year deficit in public works construction since currency devaluations and hyperinflation plagued Brazil in the 1980s and 1990s.

Central Bank President Henrique Meirelles, who last month said the nation had enough reserves to protect the currency, is taking a more cautious tone these days. He told reporters Friday the “situation is very, very serious. We should stop making jokes about it.”

The gravity became evident Friday, when the leader of a 160-member group of the nation’s largest contractors, known by its initials ABDIB, pleaded with Lula to establish a $5-billion emergency loan fund to provide short-term credit for infrastructure projects already in progress or about to begin construction.

“Credit is closing down or getting expensive,” said spokesman Jose Casadei of ABDIB. He added that $40 billion in hydroelectric projects, some situated in the Amazon, were among those in jeopardy.

Last week, Brazil announced it was putting off an auction for building the $3.5-billion Rio Madeira high-tension power line stretching from the Amazon basin to the outskirts of Sao Paulo. State-controlled oil company Petrobras indicated it may delay a deadline for proposals from companies interested in exploring a promising offshore field called Pre-salt, a project that could put Brazil in the major league of oil exporters.

Big private projects also have been affected, including new and
expanded mines in Peru and Chile, and the construction in southern
Brazil of a huge wood pulp factory. The factory’s promoter, Aracruz,
was one of several companies burned by the collapse of Brazil’s
currency in recent weeks.

The crisis hit Brazil — flush with
four years of economic growth, strengthened public finances and growing
investor confidence — as it was preparing a massive push to address
its infrastructure gap.