Airport Trouble in Brazil

Brazil, host of the 2014 World Cup and 2016 Summer Olympic Games, has a lot of infrastructure problems.  As a rapidly developing economy, the country has the infrastructure of a much less developed nation.  A recent report from the Brazilian Institute of Applied Economic Research indicated that most of the airports in Brazil were currently operating well above capacity and would be unable to handle the increased air traffic associated with a major sporting event like the World Cup or Summer Olympic Games.  The two main airports in Sao Paulo, for example, are currently operating 25% above their capacity.  Media reports indicate that it will take more than $7 billion in new investment to increase airport capacity by enough to accommodate the World Cup.

Modern economies need transportation infrastructure – airports, ports, roads, etc. – to operate effectively.  Brazil clearly plans to become a modern industrial economy.  I have never understood why some countries will only undertake this sort of infrastructure investment if they host a major sporting event.  If your airports are old and too small for the current economy, and hindering additional economic development, then make the investment.  Don’t wait until you are awarded the World Cup to undertake the projects.

With the 2014 World Cup still 4 years away, the Brazilians still have time to expand and renovate their airports.  But not that much time – airport renovation projects take a long time from the commencement of planning to completion.  The news articles I have read don’t mention that anything is actually being done to address the problem.  Tempus fugit.

Institute of Applied Economic Research

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2 Responses to Airport Trouble in Brazil

  1. jeremiah pope says:

    I think that Brazilian air transportation is crippled by a highly inefficient model that does not allow the free-market to dictate resource allocations. Sadly, it can take a large global event (i.e. Olympics or World Cup) to expose bottlenecks in a nation’s economic reform policy.

    Unfortunately, for the Brazilian people, the Infraero* will procure the capital necessary to prepare airport infrastructure for the world’s short-term “boom” demand. After 2016 projected consumer demand will be met by supply, but the long-term fixed costs of rapid scalability will then be passed on to the Brazilian consumer at a rate that exceeds sustainable market growth. An “If you build it, they will come” mega-event planning philosophy will cripple tier two nations; Montreal and Vancouver are shining beacons of how infrastructure investments often do not bring a return on investment.

    *When I read your blog post I knew nothing about the Brazilian air market. My first thoughts were to recommend efficiency improvements like those instituted in Vancouver that used kiosks (1) to temporarily increase baggage capacity. Further study made that original thought rather futile. I found the 2006 paper titled Operating Conditions and Performance of Brazilian Airports by Simon Engert very engaging (2).

    (1) Infanger, J.. (2008, August). THE VANCOUVER ‘EXPERIENCE’. Airport Business, 22(9), 12-15. Retrieved June 6, 2010, from ABI/INFORM Trade & Industry.
    (2) http://www.infraday.tu-berlin.de/fileadmin/documents/infraday/2006/papers/eichinger_engert-coair2006-paper-Operating_Conditions_and_Performance_of_Brazilian_Airport-v01-20_09_2006.pdf

  2. Brad Humphreys says:

    Jeremiah,

    Thanks for the interesting perspective on this problem. I think you are correct that hosting a high profile sporting event can expose problems in a country’s economic policies.

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