Transport costs in Brazil under the light of geographical economics

In the beginning there was only space. It was only after mankind started to worry and delft into metaphysical considerations about the limitation of their own existence on earth by counting days, seasons, years, that the notion of time came into existence. Yet, time has and will always be somehow connected to space, to movement across space. Geographical economics shrewdly captures the relative notion of time and space with the concept of transport costs. As long as there is a distance between things, it will take time to carry people, goods, knowledge, or information from one place to another. No matter how infinitesimal the dividing time or space between things may be made by technology, there will always be an economic cost related with the abridging of it. As long as our time on this common ground remains scarce, both time and space will have an opportunity cost associated with it and, therefore, an economic cost. Some will argue that, besides transport costs, there are many other determinants to the spreading or agglomeration of human activity over space. I do not dispute with them. Yet, for a geographical economics model to deserve praise, transport costs will have to be reflected in it one way or the other. The level of transport costs has always played a significant part not only in the development of countries but also in the shaping of the urban scenario within countries and regions. The Brazilian roads system has in the past been the major driving force that propelled development and interconnectivity of urban systems across this continent-size country. Until recently the policy of the federal government had leaned towards granting users free access to roads in order to promote economic development. Under the argument of the `failure of the state' in providing for the maintenance of the roads system, the federal government shifted its policy towards the privatization of the utility. The change, however, has been decided almost strictly upon political, managerial and financial considerations. Little attention has been given to the possible implications this abrupt policy change might have had on the ongoing economic development process of the affected cities and regions. Now, with the new insights offered by geographical economics, the opportunity of drawing a clearer picture of the issue is at hand. After gathering the necessary historic data, this research sets out to first offer a review of the recent displacements of economic activity over the Brazilian ground, then to present a description of geographical economics, its core model and its variant inclusive of congestion, of the Helpman_Hanson model of geographical economics, and finally we apply the core model of geographical economics to Brazilian recent reality. The expected outcome of this study is to offer politicians in Brazil a tool _ shaped to fit more closely to a developing country's reality _ to be used when deciding on policies that bear direct implications on trade and displacement of human activity across this continent-size country.