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

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

Research in Transportation Economics, 2014, vol. 48, issue C, 422-428

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.

Keywords: FS; Investment in infrastructure; Subway; Brasília (Brazil) (search for similar items in EconPapers)
JEL-codes: E22 H23 H43 H54 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.retrec.2014.09.069

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