Should you be tempted by Brazil?

Brazil vs England seems even more one-sided in construction than football - especially now that we have a government that spends its evenings darning socks and making nettle jam.

Understandably, the idea of doing business in sambaland has never been more attractive. During the years of military government in the seventies and eighties, Brazil pursued a drive to greatness through immense civil engineering projects such as the Sobradinho dam and the Trans-Amazonian highway, while building up equally immense reservoirs of deprivation in the favelas that surrounded its cities. This time it’s different. The country’s inflation rate, which was running at 2,000% 16 years ago, has been tamed, GDP has more than doubled since 1990 and its borrowing this year was a mere 1.5% of GDP. And the government is planning to extend spending to those people living in shanty towns - there are 612,000 in São Paulo alone - so there’s absolutely no problem with demand.

So why aren’t British firms taking an interest? As we report on page 32, the number of UK contractors and architects with independent offices in the country is exactly zero. The reasons are fairly predictable: Transparency International last year put Brazil in the bottom half of countries ranked by government corruption, and it has a mature, well defended and entirely unfamiliar construction market of its own. Added to that is the fact that it’s just naturally difficult to work abroad: if you consider the travails of firms such as Kajima that tried to crack the relatively open and honest UK market, you can see what a battle it can be to adapt to foreign regulatory systems and business cultures.

Two years ago, most UK companies would have happily considered a punt on the region. Firms with little experience of foreign entanglements (or knowledge of what happened in Saudi Arabia in the seventies) piled into the Middle East and apparently prospered. Even after the market crashed, and deals were reneged on, many of those firms were probably glad they took the risk. Of course, some were badly burned - our story on Laing O’Rourke’s woes is the latest example - but they have not turned to ash.

It’s different now. Many of those tempted by Brazil’s riches will not be gambling with a fraction of their winnings, but making a last desperate throw of the dice. For those firms, the danger couldn’t be clearer. Brazil does, indeed, promise a lot, but the sad irony for many UK firms is that the only companies in a position to capitalise on it are those that are already in a position of strength. For anyone else, it does indeed look like a tough nut to crack.

What they’re worth

The publication of the salaries of top civil servants this week will no doubt provoke a reaction within the industry. Several of the mandarins that earn more than £150,000 work alongside the sector, and the salaries of many others will be revealed over the coming months. Many will no doubt feel aggrieved by what the desk wallahs are earning, particularly at a time when the government’s heart is a dried prune where capital investment is concerned. The reason for the generous salaries is not a secret. Civil service pay was based on private sector “equivalence”, and bosses in the private sector have done very well over the past decade. So there may well be an argument for a realignment now that private sector remuneration is under pressure. In the meantime, the industry now has a useful way to hold these officials to account at a time when we need them to play their socks off.

Sarah Richardson, deputy editor