Construction costs hurting Brazil, group says

A jump in construction costs for works under Brazil's growth acceleration plan PAC has slowed down projects, and is driving the country's ongoing recession, NGO Acontas Abertas reported.

"The way out of the crisis is through [infrastructure] investment, not consumption," local construction chamber CBIC president Jose Carlos Martins was quoted as saying by the NGO, which seeks to improve transparency and prevent mismanagement of tax contributions.

Civil construction costs for PAC phase two works (2010-14) increased 49% during the period, and the average time to carry out a project jumped by 106%, according to a study carried out by Brazil's civil construction industry chamber Cbic and based on the 20 most significant PAC projects.

Among them are the Angra 3 nuclear power plant, the Transnordestina railroad and the metro in Minas Gerais state capital Belo Horizonte, the NGO said.

If PAC phase one and two works were carried out appropriately, Brazil's potential GDP would have increased by 0.2%, the report said, blaming the poor performance on a lack of planning, supervision and monitoring, as well as improper cost benefit studies.

If construction was carried out on schedule and supervised properly, today's recession would not be so sever, local economist Cláudio Frischtak said. The lack in investments is also due to the explosive growth in mandatory investments such as social security and welfare, added Brazilian economist Raul Velloso.

While PAC phase one entailed 86.1bn reais in projects, phase two involved approximately 153bn reais.