Research Questions

  1. What are the crucial elements for a roadmap for investing in logistics infrastructure in Brazil (providing a general review of the applicable regulatory framework and bidding procedures for PPPs in highways, railways, ports and airports)?
  2. What are the regulatory challenges for the different sectors (railway, road, airports, and ports) encompassing competition issues, quality of the regulatory framework, modelling of incentives alignment and capacity needs of the regulatory agencies?

Logistics infrastructures are critical for social and economic development. Enhancing infrastructures has therefore become a central theme for governments internationally. Given the state of public finances in Brazil, the key challenge is how to attract sufficient private investment into infrastructures so as to achieve social and economic development. This report deals with the regulation of logistics infrastructures in Brazil, focusing in particular on the federal level. Brazil, one of the key emerging economies in the world, has a particular need for developing logistics infrastructures. Past initiatives however have suffered from a lack of strategic perspective and from poor regulatory capacity. They have encouraged poor strategic investments and a 'gaming culture' among concession holders. The latest reforms have sought to strengthen the credibility and predictability of regulatory frameworks to attract 'better' and 'new' private investment into expanding Brazil's logistics infrastructure. This report argues that such an approach towards regulation is unlikely to be sufficient. Instead, it argues for a renewed focus on regulatory governance and regulatory capacity. This study therefore is interested in developing insights and recommendations that both serve the development of regulatory capacity in Brazil — a country that has witnessed considerable investment into its regulatory frameworks over the past two decades — and address sector-specific challenges.

Key Findings

Regulatory governance is at the heart of attracting investment for logistics infrastructures. Earlier approaches have been criticized for the micro-management exercised by central government and for the perverse incentives set by domestic lending institutions. Whatever the current preferences in terms of facilitating investment and competition, there are long-term issues that require addressing. These are:

  • The need for a stable policy framework that allows for long-term planning and consistent decision-making.
  • The need for a strategic capacity to develop logistics infrastructure that goes beyond the politically and administrative convenient.
  • The need to develop a clear understanding of the PPI (or any other central unit) as a coordinator of concession plans that promotes regulatory agencies and ministries in developing concessions.
  • The need for appropriate resourcing of regulatory agencies to support the monitoring of concessions along agreed 'tramlines'.
  • The need for a reputation among concession-holders that 'gambling' is not lucrative and that regulatory regimes are credible and not prone to ad-hoc renegotiation on the basis of political pressure.

This report diagnoses a number of regulatory capacity deficits, ranging from the need to enhance analytical strategic considerations, the need to consider coordination and oversight more directly, as well as to develop more challenge capacities. At present, regulatory debate in Brazil is shaped by an emphasis on reducing 'discretion'. This emphasis is understandable in view of the contemporary political climate, but is unlikely to enhance overall regulatory capacity.

Recommendations

This report puts forward the notion of 'disciplined discretion' as a model for the development of regulatory capacity. To enhance regulatory governance, there should be a dialogue between PPI, ministries and regulators about:

  • The need for a stable policy framework.
  • The need for a strategic capacity to develop logistics infrastructure.
  • The need to develop a clear understanding of the PPI as a coordinator of concession plans that promotes regulatory agencies and ministries in developing concessions.
  • The need for appropriate resourcing of regulatory agencies.
  • The need for a reputation among concession holders that 'gambling' is not lucrative and that regulatory regimes are credible.

To enhance regulatory capacity, the emphasis should be on developing 'disciplined discretion'.

Table of Contents

  • Chapter One

    Overview

  • Chapter Two

    Regulating logistics infrastructures

  • Chapter Three

    Development of the regulatory framework and recent reform

  • Chapter Four

    Regulatory governance

  • Chapter Five

    Regulatory capacity

  • Chapter Six

    Regulatory issues and challenges around logistics infrastructure per sector

  • Chapter Seven

    Recommendations: towards a roadmap for enhancing regulation in logistics infrastructure in Brazil

  • Chapter Eight

    Appendix A — Development of the logistics sector and related infrastructure between 1820s and 1990s

  • Chapter Nine

    Appendix B — Regulatory issues and challenges in the railway sector

  • Chapter Ten

    Appendix C — Regulatory issues and challenges in the road sector

  • Chapter Eleven

    Appendix D — Regulatory issues and challenges in the ports sector

  • Chapter Twelve

    Appendix E — Regulatory issues and challenges in the airport sector

Research conducted by

This report represents the joint work of a team of researchers from the Centre of Analysis of Risk and Regulation (carr) at the London School of Economics and Political Science and RAND Europe. The study was conducted with the financial support of the UK's Prosperity Fund.

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