Isabel Franco é destaque no Financial Times

Isabel Franco é destaque no Financial Times

Lula to woo capitalism's high priests at Davos

Luiz Inácio Lula da Silva, Brazil's left-leaning president, will try to sweet-talk many government and business leaders that he once considered his worst enemies at this week's World Economic Forum.

The former union leader, who abandoned his fiery, anti-capitalist rhetoric to win the presidency at his fourth attempt in 2002, has good reason to woo the high priests of capitalism.

He will lead a roadshow in Davos inviting foreign investors to help modernise Brazil's transport system, seen as grossly inadequate for an aspiring global trade power. "Bottlenecks are already penalising our exports, Brazil risks losing international competitiveness," says the National Industry Confederation.

According to one private sector estimate, average transport costs are twice those in Russia and China. The National Transportation Confederation (CNT) says roughly a third of Brazil's roads are in a bad or critical condition.

This year the government is investing R$6bn ($2.23bn, ?1.7bn, £.2bn) in transport infrastructure, twice last year's budget but far short of the R$50bn the CNT says is needed immediately.

Mr Lula da Silva's main selling point, in addition to the strongest economic growth in a decade last year, will be recent legislation for public-private partnerships (PPPs). Under the law, the government offers investors financial and legal guarantees including R$6bn in government bonds in case public contractors renege on their obligations.

The PPPs have generated a lot of interest, with law firms, construction companies and pension funds in São Paulo, New York and London setting up special task forces to identify investment opportunities. Multilateral lenders, including the World Bank and the Inter-American Development Bank, have also pledged assistance.

Yet analysts point to a series of potential pitfalls, including possible delays in writing the bylaws to the PPPs. The government is uncertain the first project will be ready this year and presidential elections next year could put many dec-isions on hold.

Other concerns include government attempts to limit the power of industry watchdogs by squeezing their budgets, and undermining them with new legislation and political appointments. "This law would look good in the UK or Germany but there are some serious political issues here," said Isabel Franco, legal council of the American chamber of commerce in São Paulo.

She also said that PPPs could be challenged in the notoriously slow judiciary: "Pioneers will face the risk of an untested law." Paulo Sergio Oliveira Passos, deputy transport minister, insisted that the PPP was "an agile legal instrument" and that "numerous investors" were waiting in line.

Yet judging by the reaction of one US chief executive, Mr Lula da Silva will have to be persuasive in Davos. "We are very interested in the PPPs but we won't be the first to test them," the executive said.