Archive for the 'infrastructure' Category

World Cup 2014 – current status

Thursday, December 2nd, 2010

Today, FIFA announced the countries which will host the World Cup of 2018 (Russia) and of 2022 (Qatar).

Inspired by that event, many people are searching for information about the World Cup 2014 in Brazil.

So, follows a  brief description of the situation as of today, December 2nd 2010:

The host cities were announced in May of 2009. FIFA and the Brazilian Federation chose 12 cities as hosts: Rio de JaneiroSao Paulo, Brasília, Belo Horizonte, Curitiba, Porto Alegre, Salvador, Recife, Fortaleza, Natal, Manaus and Cuiaba.

The first match of the Cup should be on June 13th 2014 (a Friday), and the final match on July 13th 2014 (a Sunday). It will be winter in Brazil, but weather will be fine in most of the cities.

Qualifyings haven’t started yet. Brazil is the only country with a secured place in 2014.

Nothing has been officially said about how tickets will be sold.

None of the twelve stadiums is not even close to being ready. It is not official yet, but it is certain that the final match of the Cup will be in Maracanã. São Paulo, the city with the best infrastructure in Brazil, will probably host the opening match (this assuming that this stadium will be ready by then; Morumbi is definitively ruled out).

While stadiums are delayed, the biggest concern is with the infrastructure, particularly the aiports; several organizations have issued warnings about the bottlenecks in Brazilian airports – see here, here and here.

FIFA and the Brazilian LOC say that they are confident that everything will be ready for 2014.

Infrastructure investments for the World Cup 2014 : US$ 18.7 bn

Wednesday, July 28th, 2010

Below, an official press release by the Brazilian Government (which, of course, must have an optmistic view), with links and comments in italic.

Brazil will invest US$ 18.7 billion in infrastructure to host the 2014 FIFA World Cup, according to Brazilian Minister of Sports Orlando Silva Jr. Speaking on a teleconference today, the Minister stated that these resources will fund 50 projects in 12 Brazilian host cities (the figure mentioned by the Minister today is the same announced a few months ago: R$ 33 bn in infrastructure alone).

Nearly 78 percent of funding will be allocated by the public sector, with the remainder coming from private sector sources (even though that figure is questionable, it is certain that most funding will come from public coffers).

While stating that “we have to work hard” over the coming four years, the Minister emphasized that “Brazil will be ready on time to host a great World Cup.”

“We will work in a timely and transparent manner to prepare Brazil for the World Cup and for the future,” said Minister Silva (according to FIFA, work is not in a timely manner). “We are focusing on sustainable development, which will not only result in Brazil successfully hosting the 2014 matches, but also improve the country for the Brazilian people.”

The projects discussed during the teleconference include investments of US$ 6.5 billion to improve urban mobility, including the development of monorail lines, subways, light rail transit systems, transit terminals and other modes of transportation. Some of these projects, the Minister noted, are already under construction.

Minister Silva also reaffirmed that all planned stadiums will be completed in time for the 2014 World Cup, noting that construction has already started for the stadiums in the cities of Manaus, Cuiaba, Natal, Salvador, Belo Horizonte and Brasilia (only in Salvador is there some significant progress; Brasilia started today; in Natal, the process was suspended for suspicion of overpricing).

The other six stadiums are currently under the bidding process (everything is moving  very slow).

In the hotel sector, the National Bank for Economic and Social Development has assigned US$ 556.0 million to finance new ventures or remodel hotels with better terms than the market. The resources will be expanded according to demand from the private sector.

To address the aviation demands posed by the mega-event, US$ 3.1 billion has been assigned to enhance 13 national airports. The federal government forecasts a 10 percent increase in traffic through Brazilian airports during the World Cup (and they are already saturated). Investment in ports will be US$ 426 million.

Under the scope of the federal government, an executive group was created to supervise all of Brazil’s preparations as host of World Cup 2014. This group includes representatives of the Office of the Chief of Staff and the ministries of Sports, Planning, Finance and Tourism. In addition, the 12 host cities signed a Responsibility Matrix, which defines the responsibilities of each federative party for the organization of the 2014 games.

The federal government forecasts that the 2014 World Cup will generate an additional US$ 104 billion in economic activity for Brazil through investment, tourism, an increase in household consumption, and the recycling of resources.

BNDES – Building the World Cup 2014 – where money comes from

Monday, July 26th, 2010

The investments for the World Cup 2014 will be made with public money.

In 2002, when Rio de Janeiro was chosen as host of the Pan American Games 2007, the estimated budget to prepare the city was R$ 409 million; in June 2007,  right before the opening of the Games, the actual cost was estimated in R$ 3.7 billion (see report here – the report was based on data provided by the National Accounting Office).

That means that the actual costs were nearly ten times higher than previously estimated. Lack of organization caused delays, which in turned resulted in several contracts without a bidding process. There were several suspicions of corruption.

Much because of this, in December of 2007, shortly after learning that Brazil would host the WC 2014, the Minister of Sports declared that there would not be public money to build the stadiums.

The implict idea was: stadium owners would have to look for private partners who, in exchange for the rights of usage of the stadium after the Cup, would bring money in to build or renovate the venues.

The problem, however, is that there are not private parties interested in investing in stadiums. The most notable case is Morumbi, which will probably be excluded from the Cup, because Sao Paulo FC can’t find investors.

Who comes to the rescue? The Bank for Social and Economic Development (Banco de Desenvolvimento Economica e Social), BNDES.

BNDES is a bank owned by the Federal Government. But it is not like Banco do Brasil, another giant State bank. BNDES doesn’t have street agencies, nor does it offer common bank services (such as current accounts, mutual funds, etc) to individuals.

All BNDES does is lending money to selected corporations, at low interest rates. BNDES charges the Long Term Interest Rate (TJLP – Taxa de Juros de Longo Prazo), defined by the Federal Government; currently, the TJLP is 6% per annum – see official values of TJLP. The Treasury borrows from the market paying a (target) interested rate called Selic; the Selic is always higher than the TJLP; today, the Selic is 10.75% per annum –  see official values of Selic. And if someone needs a loan from a bank, the interest rates in Brazil are the highest in the World.

This means that every time that BNDES loans money to someone, the bank is giving a subsidy to the borrower.

And where BNDES gets money to give away?

First, some of it comes from the return of previous loans (as explained above, this return is lower than any other option in the market). Next, by force of law, a part of taxes paid in Brazil goes towards Funds managed by BNDES – and we are talking of billions of dollars here.  And last, when even more money is needed, the Treasury transfers money to BNDES – this year alone, the Government transfered nearly US$ 100 billion to BNDES.

No wonder that BNDES have got so much money to loan. There were R$ 3.6 billion for public stadiums and R$ 1 billion for hotels (new hotels and renovation of old ones); private stadiums can’t get loans, but the contractors can (they received tens of billions in 2009); investments in technology, of course, will have their share from BNDES.

The investments for the World Cup 2014 will be made with public money.

BBC writes about the World Cup 2014

Thursday, July 22nd, 2010

The BBC published an article (excellent, as usual) called Brazil has catching up to do for 2014 World Cup.

Many of the points that BBC touched were covered with more details by this blog; so, below, we cite the BBC article with links to posts of this blog and other informative sources.

Brazilian President Luiz Inacio Lula da Silva reacted angrily to concerns voiced by officials from football’s governing body Fifa, after the end of this year’s World Cup, that Brazil was still far from ready to host the tournament in four years’ time.

“There are already people asking where are Brazil’s airports, buses, railways and stadiums? They talk as if we were a bunch of idiots (note: Lula used the term ‘band of idiots’) who don’t know what we have to do nor how to define priorities”, said President Lula at the launch of a high-speed train set to link Sao Paulo and Rio de Janeiro (note: the Government already confirmed that the bullet train will not ready before 2016).

But the fact is that Brazil does not have much to show more than 30 months after it learned it would host the 2014 World Cup (note: official FIFA announcement was made on October 30th 2007).

There have been severe delays in all 12 cities chosen to stage matches, particularly in the construction of stadiums and upgrading of airports.

Brazil is experiencing one of its best economic periods in decades, so there are resources to carry out the necessary works.

However, there is a lot of red tape to cut through, as well as politics, as most of the investment will be made with public money. In some cities there are major infrastructure challenges that relate not only to the World Cup but also to the country’s development in general.

“What is true, and very serious, is that for the last 25 years Brazilian economy did not prepare itself for this moment (of growth),” Lula conceded right after complaining about Fifa’s remarks.

The state of the airports is a good example. Investment is long overdue and the main airports in Brazil are already operating much beyond their capacity.

Sao Paulo International – the biggest airport in Brazil – was planned for up 17 million passengers per year but in 2009 its two terminals handled almost 22 million. There have been plans since 2001 for a third terminal but nothing has happened.

On Monday, President Lula signed a bill to speed up the renovation and expansion of airports (another law had been approved sooner) with a total investment of $3bn, but there are concerns about the time left to carry out the rebuilding work.

“I am not so worried about the arenas because you can build a stadium in 30 months after you have an engineering project ready, and we have 47 months to the World Cup,” says Jose Roberto Bernasconi, president of the National Association of Engineering and Architecture Companies.

“But airports are a more complicated matter and I think that is our main problem nowadays,” he said. ”The problem is all airports are state run (by Infraero). We should have established long ago public-private partnerships to invest in the airports.”

Mr Bernasconi points out that the longer the delay, the more expensive the construction will be.

“The PanAmerican Games in Rio de Janeiro (in 2007) had an initial budget of some $270m but ended up at least three times as expensive because things were left to the last moment.”

In Brazil most people believe that the county will be able to organise the World Cup but there are concerns about how well the money will be used.

“We always hear so much about corruption in politics, in Brazilian football. And there is so much money involved in a World Cup that it will tempt many people,” says student Daniela Mendes.

“But if South Africa managed to do it, why wouldn’t we?”

Most of the planned investments for the World Cup are state-sponsored. Federal and local governments in Brazil have pledged a total investment of some $13bn to boost the country’s infrastructure.

The bulk of the money – $6.4bn – will be spent on much-needed upgrades in the public transport systems of the host cities with the hope that the investment in the World Cup will have long-lasting effects on people’s lives.

In Rio de Janeiro, the 26km of transit bus corridors, to be built for the World Cup (and for the Olympic Games in Rio two years later), have been described by Mayor Eduardo Paes as “the biggest investment in Rio’s public transport in 30 years”.

Rio de Janeiro is likely to host the final of the 2014 World Cup in its famous Maracana stadium. The contractor that will carry out the renovation of the stadiumbuilt for the 1950 World Cup – is to be announced until the end of the month.

The city authorities say it will be ready by 2012, but as in most stadiums across the country, nothing has actually happened on the ground yet, says Mr Bernasconi.

“I am sure Brazil will catch up in time but we have certainly wasted a lot of time already. Brazil has known for almost three years that it would host a World Cup and nothing has been done yet.”

“The government should also focus more on boosting the interest of private business in the World Cup. It is a unique opportunity to boost tourism in the country and to show the ‘Brazil brand’ abroad,” says Mr Bernasconi.

The Brazilian National Development Bank (BNDES) has made $563m available to lend to private hotel projects, because many towns will have to build more rooms. The authorities also have agreed to spend $414m on upgrading ports where cruise ships could function as hotels.

There are also concerns over how crime – particularly in Rio de Janeiro – could threaten the safety of visitors and harm Brazil’s image (note: statistics show that Rio is controlling violence).

The government is expected to announce specific plans to deal with those concerns – under the coordination of the Ministry of Justice – once the host cities go ahead with their plans for stadiums and hotels.

Rio’s mayor is convinced that visitors will have nothing but a great time in his city. “Rio de Janeiro will be ready for the World Cup. People should come, because if they don’t they will be missing a great party”, Mr Paes says.

Investments in IT and Telecom for the World Cup 2014

Wednesday, July 21st, 2010

Brazilian newspaper Valor (the best business newspaper in Brazil) published an article today July 21st 2010 (for subscribers only) about the investments which will be made in the IT (Information Technology) and Telecom sectors to prepare the country for the World Cup 2014.

According to the article, Brazil will invest a total of R$ 21.3 bn (about  US$ 12 bn, at current exchange rate) in infrastructure, to upgrade internet backbones (fiber optics, routers, computers, etc), fixed and mobile telecommunications (expansion in the number of lines and upgrade to new technologies), building of new datacenters, etc.

The article also estimates that total investment in infrastructure will be as high as R$ 143 bn.

This high amount reflects two factors: the expected big increase in demand for connections during the WC 2014 and the current bad quality of Brazilian Telecom companies.

The days of major events of the World Cup (such as open and final games) should register record number of phone calls and internet connections. In the opening of the Olympic Games 2008 in Beijing, there were 220,000 simultaneous calls and connections; today, the entire city of Sao Paulo, the busiest in Brazil, registers between 60 and 80,000 simultaneous connections.

Governments and private companies will have a challenge: to provide this massive availability of services during the Cup, without having to deal with a  large unused legacy after the event. A few months ago, the Federal Government passed a law to recreate Telebras (the former holding company  of the State owned phone companies) and charge it with the job of creating and deploying, until 2014, a National Broadband Plan.

The article makes indirect references to the current low quality of Brazilian Telecom services. “In 2014, tourists will bring their 4G cellular phones, and we will have to be ready to offer them this service”, declared the director of a Telecom.

Brazilians are still getting used to 3G, which operators still advertise as “the newest marvel in mobile technology”; there is no mention of commercial 4G in Brazil.

Service for 3G is expensive. The table below shows prices charged early this year (January 2010)  by Vivo, the largest 3G operator in Brazil; a direct link was not placed because operators seem to hide their price tables – the prices were quoted from this site.

Notice that there is a promotional price for the first 3 months, then normal prices apply (a trick to bind clients to a long term contract). Packages start with an allowance of 50 MB per month, and go all the way to unlimited plans – however, Vivo and all other operators put in the contract that, if the traffic of your “unlimited plan” goes beyond a certain level, Vivo will restrict the data transfer rate.

Besides Vivo, the other major operators of telecom in Brazil are Oi Telecom (the biggest one, if we include fixed and mobile lines, but nonetheless the worst company of all), Claro and TIM.

Who is going to build the stadiums of the World Cup 2014

Monday, July 19th, 2010

The contract for reconstrucion of Maracana will be the biggest for the World Cup 2014: the estimated cost is R$ 720 million (about US$ 400 million).

The State of Rio, owner of Maracanã, informed yesterday that one company and five consortiums will participate of the bidding process to take the contract. These consortiums paid 1% of the estimated total cost (i.e., about U$ 4 million) just to have the right to present their bids.

As expected, all major Brazilian companies will be participating of this process; these companies are the same ones which will be building or rebuilding the other stadiums of the World Cup 2014.

The company bidding alone is OAS.

The Consortiums are:

Consortium Brasil 2014: Sanerio, BA Engenharia e Meio Ambiente and Hexagonal Construções.
Consortium Construcap-Cetenco-Convap Maracanã: Construcap-CCPS Engenharia, Cetenco and Convap.
Consortium Novo Maracanã: Queiroz Galvão, Carioca Christiani-Nielsen.
Consortium Novo Maracanã Paulitec-Estacon-Recoma: Paulitec, Estacon Engenharia and Recoma.
Consortium Maracanã Rio 2014: Andrade Gutierrez, Odebrecht and Delta.

The biggest civil engineering companies in Brazil are: OAS, Queiroz Galvão, Andrade Gutierrez and Odebrecht.

These companies operate most major civil works in Brazil (roads and bridges, public buildings, hydroelectric plants, etc), they have contracts in several countries (particularly Latin America and Africa).

These companies will certainly get contracts not only to rebuild the stadiums, but to work in all major infrastructure work for the World Cup 2014: airports, ports, new roads, etc. Update, July 22nd: Andrade Gutierrez and Via Engenharia have just won a contract to rebuild the Brasilia Stadium, the second most expensive project for 2014.

The President Lula recently issued a Provisional Law reducing bureaucracy to build airports, but such Law doesn’t benefit Stadiums. So, the bidding process will to have to go through several steps, and it will take at least a couple of weeks for the process to finish and the contractor to be known.

World Cup 2014: current status

Sunday, July 11th, 2010

After the Final of the 2010 Fifa World Cup in South Africa, more and more people will be interested in the World Cup 2014.

Below, a brief report of the current situation.

Full schedule of the World Cup 2014 wasn’t released yet. It is known, however, that the matches will happen between mid-June and mid-July of 2014.

The official logo was already presented, but neither the mascot nor other symbols were. Several promotional movies inviting visitors are ready to go – the first one being displayed right after the final match in 2010.

It will be winter in Brazil, but temperatures will be much more pleasant than in South Africa. It is likely that matches will be played, in local time, at mid-morning (around 10 am), short afternoon (around 1 pm) and late afternoon (around 5 pm); that will allow audiences in North America and Europe to watch the games at comfortable times (not sooner than 6 am in Western North America, not later than 10 pm in Eastern Europe).

Tickets are not for sale yet. FIFA already said that there will be big changes from the system adopted in South Africa, so as to make tickets cheaper and easier to be bought.

It is likely that there will be jobs and volunteering opportunities for the World Cup, but there is no further information yet.

Since May 2009, the host cities have been known. To meet interests of FIFA, the Brazilian Confederation and the Brazilian politicians, it was defined that there will be matches in twelve cites (there are doubts if those many are indeed the most recommended).

There will be also twelve stadiums; nine of them are publicly owned, and three are private property. None of the stadiums is ready; a few will be built from stratch, most will be fully overhauled.

Work in all stadiums is delayed. FIFA already manifested preoccupation with the delays. Public stadiums have to deal with a lot of bureaucracy; private stadiums have troubles finding money. This blog keeps track of the works in the stadiums.

Despite claims in contrary by the authorities, the infrastructure works are already delayed. According to several reports, Brazilian airports are not ready to cope with the expected flux of passengers in 2014 (600,000 foreign visitors and 3,000,000 of Brazilians). Recently, the Federal Government passed a law to speed up the works in airports.

The bullet train between Rio and Sao Paulo will not be ready for 2014. Oi Telecom was contracted to provide telecom infrastructure. Very little else has been done regarding infrastructure.

The vuvuzelas were prohibited in Brazil (ops, that was just a wishing).

The graph below shows the recent increase in accesses to this site.

Why Morumbi is out of the World Cup 2014

Thursday, July 8th, 2010

A few weels ago, FIFA officially informed that “Morumbi stadium is excluded from the 2014 FIFA World Cup“. That same note estates that  the “City of São Paulo sent recently to the LOC a sixth project, which will not be examined as it has been received long after the deadline.

Today, Morumbi is the second biggest stadium in Brazil, second only to Maracanã (for 2014, if the respective projects go as planned, other stadia could be bigger than Morumbi, such as Beira-Rio). The stadium belongs to Sao Paulo FC, and for a long time it was the biggest private stadium in the World.

Why then Morumbi, which was claiming to host the opening match of the World Cup, was excluded from the event? The answer is, basically, money.

São Paulo FC owns the stadium, and should pay most expenses to adapt the venue to meet FIFA requirements. It was estimated that it would take R$ 650 million (about US$ 350 million) to implement the design presented to FIFA (the sixth project mentioned by FIFA was an attempt to reduce the cost to R$ 265 million, or about US$ 150 million). It looks like Sao Paulo FC double checked the numbers, and decided that the investment was not worthy.

The public stadiums don’t suffer the same problem, because the Federal Government opened generous credit lines to finance the building or restoring of stadiums; the Governments taking the loans still have to provide collaterals, but Governors don’t hesitate in taking the money – for the World Cup brings immediate political gains, whereas the debts will be paid in the distant future. São Paulo FC and the owners of the other private stadia talked to the Federal Development Bank about loans, but they didn’t get into agreement.

The Governments  of São Paulo (both the State and the city) were not much enthusiastic about pumping money into the project, either. Besides adapting the stadium, FIFA requires extensive changes in the neighbourhood, such as more transportation, more parking space, more and wider access streets – and all of this is incumbent to the Governments.

Morumbi is one of the poshest quarters in Sao Paulo, and the Governments knows that any infrastructure intervention here is very expensive. Both the State and the city of Sao Paulo are ruled by the same Party coalition (more to the right wing than the Federal Government), and they often say that spending money with basic health and education could be wisere than funding the World Cup – the Mayor of Sao Paulo is in South Africa, and declared that “if Sao Paulo can’t host the matches, so be it”.

It is not a coincidence that, along with Sao Paulo, Curitiba is the host city which causes most preoccupation to CBF. The stadium of Curitiba, Arena da Baixada, is also private owned, and the city is also known for being a wise spender of public money. And it will be no surprise if Beira-Rio, in Porto Alegre (the third private owned stadium), also becomes reason of concern soon.

Law reduces bureaucracy of airports building

Tuesday, June 8th, 2010

A few weeks ago, FIFA manifested preoccupation with the delays in the works for the World Cup 2014. The Brazilian Local Committee started an auditing in all host cities, to check out how the works in the stadiums were going.

However, as the Minister of Tourism recently declared, even more than stadiums, the concern is with airports. Stadiums can be shut down during refurbishment, and more money can be pumped into them to speed up the works; however, in airports (most of which are already working above capacity), any move which impacts the existing flow of passengers must be carefully planned.

The Brazilian Government acknowledged the problem, and issue the Provisional Measure 489 – MP 489 – see ful text here (in Brazil, a MP must be confirmed by the Congress, but it is enforced as law since its publishing by the President of the Republic) allowing to Infraero more flexibility to hire contractors.

The MP also created the Olympic Public Authority (APO), a body whose goal is to guarantee tha Brazil and Rio will comply with the demands of the Olympic Committe regarding the Olympic Games of 2016. Article 11 of the MP determines that all biddings related to the APO and to the infrastructure of airports necessary to the realization of the World Cup 2014 shall be regulated by the MP.

The two main changes are: electronic auctions (bids are made over the internet) are now allowed; the bidded price will be ranked first, and only afterwards will the technical and financial qualifications of bidders be evaluated.

According to Infraero, the new legislation “will permit faster bidding process, will alllow fewer appeals to bidders, and will lead to faster conclusion of works”.

Some specialists, however, say that the MP is illegal. For them, the flexibilization of the bidding law is allowed only in cases of emergency or perils, and not in situations caused by the omission of the Government.

In 2007, Rio hosted the Pan American Games. The initial estimative was that the event would cost US$ 200 millions in infrastructure; a few months before the Games, the works were delayed, there were also changes in the bidding process; as a result, the final cost shot up to more than US$ 2 billion (see here and here).

Anyhow, despite the controversies, Infraero can now try to speed up the building and refurbishing of airports.

Airports of World Cup 2014 saturated

Thursday, June 3rd, 2010

IPEA is the Brazilian Institute for Applied Economics Research, an official body reknown for producing unbiased studies about the Economy of Brazil.

IPEA published recently a study called Perspectives of Air Transportation in Brazil and in the World; the study provides information to help the Brazilian Government better direct investments in infrastructure.

According to IPEA, Brazil has not invested enough in airports, which resulted in several bottlenecks; in 2009, the number of passengers was 40% higher than in 2008. Both passenger and cargo transportation have been affected. In 20 years, the number of passengers will be the triple of today.

Still according to the study, of the twelve host cities of the World Cup 2014, in eight the airports operated above nominal capacity in 2009: Sao Paulo, Rio de Janeiro, Brasilia (these three cities concentrate 40% of total air traffic in Brazil), Natal, Belo Horizonte, Curitiba, Porto Alegre and Manaus. In all these airports, the number of landings and take offs requested by airline companies was superior to the nominal capacity of the airports.

Four host cities were not qualified as saturated by IPEA technical criteria: Recife, Fortaleza, Salvador and Cuiaba. However, as pointed by other reports (see here and here), even these airports may not offer the comfort and service levels expected by passengers.

FIFA, CBF and the Brazilian Government are rushing to prepare the airports for the World Cup 2014.