Frank Holmes'  Instablog

President Lula de Silva of Brazil has big plans for his country’s energy sector.

Lula proposes to spend $255 billion on energy between 2011 and 2014, and another $344 billion in the years after that. The goal is to secure a reliable supply of energy, and would include expanded electrical grids, oil and gas exploration, renewable sources and improved energy efficiency.

 

The need is certainly there – last fall we highlighted some of Brazil’s infrastructure gaps, as observed by our global strategist Jack Dzierwa when he traveled there.

But what about the funding? Brazil has a relatively small tax base and its public debt-to-GDP ratio of 67 percent is relatively high among other key Latin American economies. Lula’s plan would require a tax hike or more debt on the national balance sheet.

Another potential hurdle is this year’s presidential election. Lula can’t run again, but he is throwing his weight behind Cabinet Chief Dilma Rousseff – if Rousseff wins (she now trails in the race), the plan’s chances improve.

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