Announcement of Brazil’s New Growth Acceleration Program (Novo PAC)

The government plans to make large-scale investments in a total of 9 fields to promote economic growth and strengthen national competitiveness.

This could be an opportunity to invest in infrastructure construction and equipment.

History of the Brazilian Growth Acceleration Program (Programa de Aceleração do Crescimento, PAC)

The Brazilian federal government's Growth Acceleration Program (Programa de Aceleração do Crescimento, PAC) was launched in 1 during the first Lula government as an economic policy and investment project to promote Brazil's economic growth. The Growth Acceleration Program aimed to promote economic growth and strengthen national competitiveness by executing large-scale investments by the federal government, major corporations, and the private sector in the construction, sanitation, energy, transportation, and logistics sectors.

The first growth acceleration program was promoted for four years from 1 to 2007 and had a budget of $2010 billion. As a result, although not all of the planned budget was implemented, achievements such as large-scale oil field development, construction of power plants and transmission and distribution networks, expansion of highway and railroad infrastructure, and expansion of water supply and sewerage and housing were achieved, leading to increases in economic growth and investment rates. In fact, Brazil's economic growth rate reached 4% in 1000 and 2007% in 6.1, exceeding the original target. The investment rate also increased from 2008% in 5.1 to 2006% in 16.4. During the program period, a total of 2008 billion reals was invested in the energy sector, new oil fields were discovered, and crude oil production increased from an average of 18.7 million barrels per day in 1750 to 2007 million barrels in 185. The second growth acceleration program began in 2009 during the administration of President Dilma Rousseff, Lula's successor, and was promoted with the goal of investing approximately $202 billion.

Overview of the New Growth Acceleration Program (Novo Programa de Aceleração do Crescimento, Novo PAC)

The third Lula government, launched in January 2023, announced the New Growth Acceleration Program (Novo PAC) in August 1 to promote Brazil's economic growth. Similar to the first and second programs, large-scale infrastructure investment was the main content, and the goal was to invest approximately $3 billion over the next four years in 2023 states. Of the total budget, about $8 billion will be invested by the federal government, $1 billion by state-owned enterprises, $2 billion by financial institutions, and $27 billion by private companies.

A total of nine major investment areas in the New Growth Acceleration Program are as follows.

1. Internet distribution and connectivity (investment of $56 billion)

The Brazilian government is promoting the installation of high-speed Internet networks in public schools and public health centers. In addition to expanding 5G, 4G will be installed on highways and mountainous islands where there is currently no internet.

2. Health care (investment amount of $60 billion)

In this area, the establishment of basic health centers (Unidade Basica de Saude, UBS), general hospitals and obstetrics and gynecology departments, and the purchase of ambulances are promoted. In addition, we plan to build a biomedical industrial complex to strengthen the supply of vaccines and blood products and invest in telemedicine.

3. Education (investment $90 billion)

The establishment of kindergartens, full-time schools and the modernization of federal universities are priorities. Investments in education are aimed at keeping students in school, learning literacy at an appropriate age, and improving productivity.

4. Social infrastructure (investment amount of $4 million)

This field aims to promote coexistence and reduce social violence by improving citizens' access to cultural, sports and leisure spaces.

5. Sustainable cities (investment amount of $1220 billion)

It aims to improve cities to adapt to climate change and improve the quality of life for its people. This field includes 'Minha Casa Minha Vida', a new housing construction project for low-income people. In addition, we plan to invest in infrastructure such as transportation modernization, slum urbanization, water treatment facility improvement, solid waste management, and flood prevention to build sustainable cities.

6. Improving water resources (investment of $60 billion)

This field aims to improve the quantity and quality of available water resources. In order to guarantee water resources to all citizens, we plan to respond to climate change and invest in comprehensive water resource conservation that integrates maintenance, preservation, and restoration and revitalization of the water system.

7. Efficient and sustainable transportation infrastructure (investment of $942 billion)

This field aims to improve Brazil's national competitiveness by making large-scale investments in roads, railways, ports, and airports in all states of Brazil. In particular, investments will be focused on federal highways and railroads. In the case of highways, approximately 267 projects are planned, and government investment of $146 billion and private investment of $225 billion are planned to connect and improve the road network in all states. In the case of railways, the most important project is the construction of the Transnordestina section of the metropolitan railway network to Recife, a major city in the northeast. The project will build a railway from Salgueiro to Porto de Suape, connecting the port with the hinterland. In addition, it includes the repair of the Juiz de Fora section in the southeastern state of Minas Gerais and Barra Mansa in Rio de Janeiro, and the construction of the west-eastern integrated railway (Fiol 2) and the mid-western integrated railway (Fico 1). .

<Novo PAC major road and railway projects>

  

[Source: Brazilian Federal Government website, October 2023.10]

8. Energy transition and security (investment amount of $1080 billion)

The sector aims to improve employment, income and social inclusion by diversifying energy sources and ensuring energy security and efficiency to promote economic growth. Through this project, approximately 80% of electricity will be provided by renewable energy, and the 'Luz para Todos' program will increase electricity penetration in isolated areas of the Northeast and Amazon. In addition, the company plans to expand its low-carbon fuel production capacity by investing in Pre-Sal, an offshore oil field in Brazil.

9. National Defense (investment amount: $106 billion)

Investment in the defense sector promotes equipment modernization and technological development to strengthen the national defense capabilities of the Brazilian Army, Navy, and Air Force. The major projects by county are as follows.

implication

The Lula government announced a new growth promotion program to promote economic growth and strengthen national competitiveness. There are concerns that, like the first and second growth promotion programs, investments may not be made as planned. However, Brazil has recently shown a solid economic growth rate based on strong exports of grains and minerals and stable exchange rates and inflation, so national trust has increased compared to the past. Therefore, it is highly likely that large-scale investments will be made in the government and private sectors over the next four years through the new growth promotion program, so it can be an opportunity for Korean companies to export and invest in infrastructure construction and related equipment.