Brazil's economic growth is inhibited by inadequate infrastructure. Comment on the role of the following features of Brazil's political environment in light of the conditions for growth:
"Regulators and the courts cannot be counted on to uphold contracts. In a recent survey of 21 regulatory agencies, 12 reported attempts by government to interfere in their decisions. The rules themselves are in flux. Take electricity. Lula (Brazil's President) scrapped a system which used price signals to induce investment in generation. But the replacement-centralized auctions based on demand forecasts by distribution companies-has failed to attract investors, partly because of a government price cap. Investment in water and sewerage is stymied by a fight between lower levels of government over which should control it. In Brazil 36 percent of concession contracts have been renegotiated, usually at the instigation of the government. All but the most profitable investments have been deterred by the high-though now falling-cost of capital."