Interview With Fábio Figueira, Partner, Veirano Advogados Law Firm, Brazil

This week, IFN brings you an exclusive interview with Fábio Figueira, a partner at Brazillian law firm Veirano Advogados, during which we discussed Islamic finance opportunities in Brazil and the country's investment infrastructure.

1. What are the current trends in general investments and what are the opportunities for Islamic finance to spread in Brazil?

   Since the Growth Acceleration Program (PAC) was launched in 2007, investments in the infrastructure sector in Brazil have significantly intensified, with a focus on housing, sanitation, transport and energy projects. Whereas several new projects and concessions on ports, airports and roads, as well as in the energy sector, have been granted and developing in the recent years, a large portion of such investments is yet to be done or even in need of further financing to move forward.

   The opportunities for investments are not only found in projects to be developed, but also on ongoing finance to support the companies' cash flow. The electricity sector, for instance, in which project finance has dominated the financing transactions on the energy generation side, is now demanding heavy financing for its operational side as well. Due to the current hydrologic situation in Brazil and corresponding rise in energy prices, distribution companies alone have already contracted loans in excess of USD 6.5 billion in 2014, and are currently seeking additional funding to settle energy purchases of 2014. As prices and demand for energy continue to increase, it is expected that both additional investment and financing will be necessary in the upcoming years.

   In this scenario, regular loan structures are being replaced for more complex transactions, involving various types of arrangements, from infrastructure bonds to equity deals. As sponsors in the infrastructure sector look for innovative and alternative solutions for their investments, we believe that the opportunities for Islamic investments in this sector will continue to rise. Of course, as discussed below, these alternatives should be carefully reviewed in order to ascertain that they would be Shariah compliant.

2. What are the preferred vehicles to invest in the country? Any local incentives?

   Investments in Brazil made by foreign entities usually take place by means of (i) the incorporation of a legal entity in Brazil or (ii) the acquisition of the totality or part of the capital stock of a legal entity already incorporated in Brazil. The most...