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Analysing the fiscal sustainability of transit investment projects: The case of the metropolitan railway of Brasília

Author

Listed:
  • Morais, Artur Carlos
  • Aragão, Joaquim Jose Guilherme
  • Yamashita, Yaeko
  • Orrico, Rômulo Dante
  • de Freitas Dourado, Anisio Brasileiro

Abstract

This paper aims to analyze the fiscal sustainability (FS) of an infrastructure investment infrastructure project. This issue becomes progressively more relevant, as reinforced transport infrastructure investment, albeit being recognized as an important condition for economic growth, may drive public finance into dire straits. Therefore, after consolidating a concept of FS for infrastructure investment and its evaluation parameters (solvency, liquidity and robustness), they are tested in a case study (Metropolitan System in Brasília). The execution of this project and of the Águas Claras neighborhood took place simultaneously. The study shows that the potential revenue from real estate would be enough to cover the public expenditures for the rail project and for the urban infrastructures of the township, meeting the solvency condition. However, it could not comply with the liquidity and the robustness conditions, due to incidents and management problems in its execution, which suffered several interruptions. The paper finishes with some lessons for the policy, requiring the mandatory and thorough analysis of economic and fiscal impacts of infrastructure investment projects, but also suggesting that they should be put together with other private and public investment projects which foster directly growth, so that their joint effect would result fiscally sustainable.

Suggested Citation

  • Morais, Artur Carlos & Aragão, Joaquim Jose Guilherme & Yamashita, Yaeko & Orrico, Rômulo Dante & de Freitas Dourado, Anisio Brasileiro, 2014. "Analysing the fiscal sustainability of transit investment projects: The case of the metropolitan railway of Brasília," Research in Transportation Economics, Elsevier, vol. 48(C), pages 422-428.
    • Handle: RePEc:eee:retrec:v:48:y:2014:i:c:p:422-428
    DOI: 10.1016/j.retrec.2014.09.069
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    References listed on IDEAS

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    1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    2. César Calderón & William Easterly & Luis Servén, 2002. "Infrastructure Compression and Public Sector Solvency in Latin America," Working Papers Central Bank of Chile 187, Central Bank of Chile.
    3. Fabiana Rocha & Ana Carolina Giuberti, 2005. "Composição Do Gasto Público E Crescimento Econômico: Um Estudo Em Painel Para Os Estados Brasileiros," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 049, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    4. Weiguo Lu, 1996. "Public Infrastructure and Regional Economic Development: Evidence from China," Asia Pacific Economic Papers 258, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
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    More about this item

    Keywords

    FS; Investment in infrastructure; Subway; Brasília (Brazil);
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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