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Larry Pascal in The Wall Street Journal: Heard On The Street - Infrastructure Enthusiasm Builds in Brazil
08/15/2011

Imagine trying to get around a country roughly the size of the U.S. but with only about half the paved roadway of the U.K. Welcome to Brazil ...

Brazil must modernize. The most pressing catalysts are the soccer World Cup in 2014 and the Olympic Games in 2016. But there are more profound drivers, too. First, bottlenecks increase costs, exacerbating inflation. For example, a shipping container spends 10 times as long sitting idle in the Brazilian port of Santos as it does in Hamburg, or in Rotterdam, the Netherlands, says Paulo Resende, infrastructure specialist at Brazilian business school Fundação Dom Cabral.

Second, exports of commodities like iron ore and soybeans are critical to the economy. But growing these requires expansion of infrastructure, especially transport links between the agricultural interior and the coast.

Still, investors seeking exposure to the Brazilian infrastructure opportunity must choose carefully. The Brazilian stock market has had a dismal year, made worse by the recent flight from risk globally. Political risk is also high. "Brazil is without a doubt the most complex regulatory environment in Latin America" says Larry Pascal of law firm Haynes and Boone LLP.

Excerpt from The Wall Street Journal, Aug. 15, 2011. To view the full article, click here (subscription required).