Regulation during the Lula Government

More so than most other areas of economic activity, infrastructure sectors tend to exhibit large sunk investments, specific assets, economies of scale, and involve politically sensitive goods and service, often produced by foreign companies (Levy and Spiller 1996, Savedoff and Spiller 1999). These characteristics make the industries in these sectors particularly prone to governmental opportunism, so that investment will only materialize in an effective manner if investors can be convinced that there are reliable safeguards against governmental expropriation.