Journal of Development Effectiveness Vol. 3, No. 1, March 2011, 44–61 Assessing the ex ante economic impacts of transportation infrastructure policies in Brazil Eduardo Amaral Haddad a,b * , Fernando Salgueiro Perobelli c , Edson Paulo Domingues d and Mauricio Aguiar e a Fipe and Department of Economics, University of Sao Paulo, Av Prof. Luciano Gualberto 908, FEA 1, Cidade Universitaria, Sao Paulo 05458-001, Brazil; b Regional Economics Applications Laboratory, UIUC, USA; c Department of Economics, Federal University of Juiz de Fora, Juiz de Fora, Brazil; d Department of Economics, Federal University of Minas Gerais, Belo Horizonte, Brazil; e Tectran Técnicos em Transporte Ltda., Belo Horizonte, Brazil This paper uses a fully operational inter-regional computable general equilibrium (CGE) model implemented for the Brazilian economy, based on previous work by Haddad and Hewings, in order to assess the likely economic effects of road trans- portation policy changes in Brazil. Among the features embedded in this framework, modelling of external scale economies and transportation costs provides an innovative way of dealing explicitly with theoretical issues related to integrated regional sys- tems. The model is calibrated for 109 regions. The explicit modelling of transportation costs built into the inter-regional CGE model, based on origin–destination flows, which takes into account the spatial structure of the Brazilian economy, creates the capability of integrating the inter-regional CGE model with a geo-coded transportation network model enhancing the potential of the framework in understanding the role of infrastruc- ture on regional development. The transportation model used is the so-called Highway Development and Management, developed by the World Bank, implemented using the software TransCAD. Further extensions of the current model specification for integrat- ing other features of transport planning in a continental industrialising country like Brazil are discussed, with the goal of building a bridge between conventional transport planning practices and the innovative use of CGE models. In order to illustrate the ana- lytical power of the integrated system, the authors present a set of simulations, which evaluate the ex ante economic impacts of physical/qualitative changes in the Brazilian road network (for example, a highway improvement), in accordance with recent policy developments in Brazil. Rather than providing a critical evaluation of this debate, they intend to emphasise the likely structural impacts of such policies. They expect that the results will reinforce the need to better specifying spatial interactions in inter-regional CGE models. Keywords: ex ante impact analysis; transportation; infrastructure; regional analysis; general equilibrium 1. Introduction One of the main obstacles to economic development in Brazil is the so-called Custo Brasil, the extra costs of doing business in the country. Enterprises are faced with a heavy burden that competing firms in other countries do not confront, hampering competitiveness. It *Corresponding author. Email: ehaddad@usp.br ISSN 1943-9342 print/ISSN 1943-9407 online © 2011 Taylor & Francis DOI: 10.1080/19439342.2010.545891 http://www.informaworld.com