The economic cost of Rio de Janeiro and São Paulo’s transport failures

FIRJAN (the Industry Federation of the State of Rio de Janeiro) has just released data on the cost of traffic congestion in Rio de Janeiro and São Paulo. They estimate that together the two cities lost a staggering R$ 98 billion last year, the equivalent of 8% of the cities’ total GDP and 2% of Brazil’s GDP.

Traffic jams are part of daily life in São Paulo

This amount only takes into account lost work hours and doesn’t factor in the health impact of car fuel emissions on the general population or other indirect impacts on the economy. And yet even this conservative estimate is equivalent to the cost of building 200km of extra metro lines every single year!

In fact the amount lost yearly is bigger than the estimated budget for transport capital investment in Brazil, Mexico, and Argentina combined. 

How the results will be interpreted, however, is another matter. The more congestion is seen as a problem, the more consideration is given to building extra lanes and highways thereby reinforcing the car culture. 

In a country where car ownership is increasing, local governments need to start thinking about long term solutions focused on encouraging the use of alternate transportation rather than accommodating additional cars which in turn will attract yet more vehicles onto the roads.

The tender nobody wants to touch: Why the Rio to São Paulo bullet train still isn’t built

What the train could look like (if it were built..)

Talk about a rail link between Rio de Janeiro and São Paulo is not new. And it’s not hard to see why people get excited about it. São Paulo– Rio de Janeiro is the busiest air route in the world with 1,130 commercial flights a week.

No two airports in the world has more aircraft movements and part of the reason is the lack of adequate alternatives. Taking a bus takes 6-7 hours if you are lucky enough to avoid heavy traffic and there is no train service, nevermind a bullet train.

Why then is not built already? The answer is not so much in the politic will, Dilma Rousseff actually went as far as promising it would be built in time for the 2014 world cup which is obviously not going to happen. The fact the project has vanished into thin air means she has actually been accused by some of using it only as an election tool.

The other reasons lie in cost, expertise and corruption. The cost of operating the line would be R$35.6bn (US$15.2bn) and the tender was already  launched back in 2010. The problem turned out to be that no capable company was interested in bidding for it. The submission date was moved from April 29^th to July 29^th 2011 in an effort to attract more companies but again not a single company showed any interest.

An infographic of the tender process

To attract more bids, it was decided the total cost would be split into two separate areas, operability and construction, which could receive individual bids. One tender would be for the actual construction and infrastructure project and the other for the operational and technological running of the line.

The phase 1 tender (construction) was set for December 2012 and again not a single construction company in the world found it attractive.

Alstom, the only bidder, is marred in accustions of corruption 

Finally in August last year Alstom, a company involved in other transport projects in Brazil (such as the metro in São Paulo), participated in the tender. However hopes were immediately dashed due to separate allegations of cartel forming. Until the investigation against Alstom has been resolved, there will presumably not be any further bids and therefore no further advancement in the much talked about Rio-São Paulo bullet train link.

Transport minister César Borges puts it the following deliberately vague way that only politicians truly manage: “In 2014, I do not expect a tender launch until after the October election. Otherwise, it should occur the following year,"

In Brazil there’s always tomorrow, if indeed the intention to build the bullet train is actually genuine..

São Paulo: 10th most expensive place to send an expat

We increasingly need bigger notes than this one down in São Paulo...

Every year Mercer does a study of the cost of 200 items to derive a comparative ranking of the cost of living in various cities worldwide, or more accurately the cost to a company of sending an expat to live there.

This year the top Brazilian city, and the top South American city for that matter, is São Paulo, up 11 places and in the Top 10 global wallet munchers for the first time. In fact it's not only the highest placed South American city, it's been ranked as more expensive than any US city too and by quite a margin.

And while the economic downturn has kicked European cities down the ranking, Brazil with the help of its strong Real has other cities jumping up the ranking after São Paulo; Rio is up 17 places to 12th spot and Brasilia up 37 places to 33rd place.

Yes, security is factored in (which is why Luanda is at No 1 spot) and yes, it is subject to global inflationa and currency fluctuations but every algorithm needs its assumption and it's good enough for me to think about asking my company to do the right thing, protect my purchasing power and raise my salary...

Rankings
March 2011	March 2010	City	Country
1	1	LUANDA	ANGOLA
2	2	TOKYO	JAPAN
3	3	N'DJAMENA	CHAD
4	4	MOSCOW	RUSSIA
5	5	GENEVA	SWITZERLAND
6	6	OSAKA	JAPAN
7	8	ZURICH	SWITZERLAND
8	11	SINGAPORE	SINGAPORE
9	8	HONG KONG	HONG KONG
10	21	SÂO PAULO	BRAZIL
11	19	NAGOYA	JAPAN
12	7	LIBREVILLE	GABON
12	29	RIO DE JANEIRO	BRAZIL
14	24	SYDNEY	AUSTRALIA
15	11	OSLO	NORWAY
16	22	BERN	SWITZERLAND
17	10	COPENHAGEN	DENMARK
18	17	LONDON	UNITED KINGDOM
19	14	SEOUL	SOUTH KOREA
20	16	BEIJING	CHINA
21	25	SHANGHAI	CHINA
21	33	MELBOURNE	AUSTRALIA
23	23	NIAMEY	NIGER
24	19	TEL AVIV	ISRAEL
25	13	VICTORIA	SEYCHELLES
25	15	MILAN	ITALY
27	17	PARIS	FRANCE
28	67	OUAGADOUGOU	BURKINA FASO
29	30	ST. PETERSBURG	RUSSIA
30	60	PERTH	AUSTRALIA
31	55	BRISBANE	AUSTRALIA
32	27	NEW YORK CITY, NY	UNITED STATES
33	70	BRASILIA	BRAZIL
34	26	ROME	ITALY
34	74	CANBERRA	AUSTRALIA
36	28	VIENNA	AUSTRIA
37	38	NOUMÉA	NEW CALEDONIA
38	38	GUANGZHOU	CHINA
39	62	DJIBOUTI	DJIBOUTI
39	76	STOCKHOLM	SWEDEN
41	62	LAGOS	NIGERIA
42	31	HELSINKI	FINLAND
43	42	SHENZHEN	CHINA
44	32	DAKAR	SENEGAL
44	141	KHARTOUM	SUDAN
46	90	ADELAIDE	AUSTRALIA
47	47	PRAGUE	CZECH REPUBLIC
48	36	BAKU	AZERBAIJAN
49	33	BANGUI	CENTRAL AFRICAN REP.
50	35	AMSTERDAM	NETHERLANDS

The Human Development Index applied to São Paulo's districts

Cost of a much loved imported Gin

Cost of local Cachaça in same store

 

One of the first surprises I got when I moved to São Paulo were the prices. I had read up extensively on the city, I already knew it was the most expensive in South America and my HR department had already reviewed my salary based on increased living expenses so I didn’t expect it to be cheap. Even so, like-for-like comparisons on basic services such as accommodation and public transport were surprisingly high versus other major cities.

As I have explored further I’ve also found that amongst the high prices there are some true bargains out there and what surprises me the most now, 2 months on, is the difference between the top and bottom price available for what is essentially the same product (eg. a meal, a night out or a piece of furniture). And I’m pretty sure that if and when I venture out of the centre this difference would explode as you start touching on both marginalized impoverished communities and fenced off luxury compounds.

For the unaccustomed it’s hard to get your head round the scale of the price disparity and the social inequalities behind them. Luckily we’re not the first to be interested in the subject; introducing the Human Development Index (HDI)*

Normally this is applied to whole countries with Norway leading and Zimbabwe last placed in the 2010 report:

See http://hdr.undp.org/en/statistics/ for more stats

But someone has gone to the trouble of analyzing all of São Paulo’s districts applying the Human Development Index (HDI)* to each one. Here is the result which is essentially the same map as above but applied at a city level:

Which means that São Paulo simultaneously has districts equivalent in HDI terms to Ireland (as is the case of Pinheiros where I happen to live) or Sweden (Jardim Paulista) as well as Azerbaijan (Lajeado) or Guyana (Jardím Ângela) which is pretty amazing.

Top 5 districts

    Moema (0.961) – (Equal to  Canada – 0.961)

    Pinheiros (0.960) – (Equal to  Ireland – 0.960)

    Jardim Paulista (0.957) – (Greater than  Sweden – 0.956)

    Itaim Bibi (0.953) – (Equal to  Japan,  Netherlands – 0.953)

Bottom 5 districts

    Marsilac (0.701) – (In line with  Mongolia – 0.700)

    Parelheiros (0.747) – (In line with  Azerbaijan – 0.746)

    Lajeado (0.748) – (In line with  Azerbaijan – 0.746)

    Jardim Ângela (0.750) – (In line with  Guyana – 0.750)

    Iguatemi (0.751) – (In line with  Guyana – 0.750)

I wonder how many cities worldwide would have such a wide range of different “human development” within its boundaries...

*For the geeks amongst you the HDI is the geometric mean of the three normalized indices below:

i.e.

 

where

  

And 

LE = Life expectancy at birth
MYS = Mean years of schooling (Years that a 25-year-old person or older has spent in schools)
EYS = Expected years of schooling (Years that a 5-year-old child will spend with his education in his whole life)

GNIpc = Gross national income at purchasing power parity per capita

Any doubts, just ask ;)