Brazil’s development bank BNDES plans to provide 20 billion reais ($4.1 billion) in funds for infrastructure projects this year, two-thirds more than in 2022 and mostly through the purchase of local debt issued by companies that invest in the sector.
(Bloomberg) — Brazil’s development bank BNDES plans to provide 20 billion reais ($4.1 billion) in funds for infrastructure projects this year, two-thirds more than in 2022 and mostly through the purchase of local debt issued by companies that invest in the sector.
The strategy is aimed at encouraging private investors to join in the purchase of infrastructure bonds, increasing the impact of financing by BNDES, according to Felipe Borim Villen, deputy managing director of infrastructure at the bank.
“BNDES has been able to attract capital markets to that type of investment, which is something infrastructure companies struggle with,” Villen said in an interview. “Capital markets usually provide them with working capital, but not with long-term financing.”
The bank has disbursed about 12 billion reais for infrastructure projects by August, the same amount provided during all of 2022. About 60% of the funds were used in the purchase of infrastructure bonds in sanitation, transportation and logistics, according to Villen.
One of the operations helped Igua, one of the largest sanitation companies in Brazil, to obtain 3.8 billion reais through the issuance of local infrastructure bonds maturing in 20 and 29 years. BNDES purchased 1.8 billion reais of the offer.
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The bank has also scooped up debt from companies that need extra funds to conclude concession projects whose costs jumped along with a post-pandemic increase in raw materials prices. In one of them, a road concession in the state of Minas Gerais, BNDES took 60% of a 520 million-real issuance.
The bank is also ready to help road concession companies that have been unable to honor contracts. One-third of the 14,000 kilometers (8,700 miles) of roads in the hands of the private sector are currently operated by companies facing financial problems, according to transportation ministry data.
The government has been in talks with the country’s audit court to find a solution that doesn’t require putting troubled concessions up for new auctions, which would further delay investments. “BNDES is part of the conversations and will be ready to help finance such companies when there is regulatory clarity,” he said.
The bank’s infrastructure financing will take into account environmental concerns, according to Villen.
“We are bringing green requirements to our operations,” he said. “The bank will not stop financing highways, which are central to the government agenda, but will do that alongside an environmental transition scenario.”
(Updates with comment from Villen in final two paragraphs.)
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