What Investors Need To Know About Infrastructure Projects In Brazil

Infrastructure investments in Brazil are at the top of the agenda of the new president. This opens many opportunities for private investors to take part in projects across sectors, like airports, railroads, highways and ports.

The last eight years were lacking in strong investments but now with the new government and more competition for commercial banks to become lender plus a much smaller lending role for The National Development Bank, BNDES, the government is hoping to attract local and foreign investments. The government knows the importance of approving the social security reform which will not only reduce the country's deficit but also indirectly lead to more available funds from the pension plans to be invested in the capital markets and on long term investments.

Energy

Energy is a mature industry in Brazil with steady cash flows and relatively easy access to credit. Most of the project, especially in renewables, have been financed by BNDES. We expect projects to continue to be financed in local currency by local banks.

Airports and ports

In Brazil, the most opportunities for infrastructure projects currently are in the country's airports and ports. The federal government has put a lot of focus on these projects and has recently (and successfully) auctioned several regional airports. These were auctioned to different global airport servicing companies resulting in a huge win for the country in terms of improving infrastructure. The market is already growing and Brazil is optimistic for the future of these types of infrastructure projects.

Financing

The financing of projects is expected to change in Brazil. The National Development Bank (BNDES) has been the main source for financing projects in Brazil but has stated they don't want to be a lender of choice anymore. Instead, they want to promote and facilitate investment without acting as sole lender. BNDES is very important for the country. It is responsible for 50% of the energy expansion and has financed 70% of all renewable energy projects. In transportation almost everything has been financed by the bank. The bank has, over the years, structured financial mechanisms for the entry of the private sector in long-term financing. BNDES's new role will have a big impact on the local lending and borrowing...