Banks and institutional investors are ready to jump on the infrastructure bandwagon following roadshows held in London and New York earlier this month, a senior official in the Brazilian development bank BNDES told Emerging Markets.
“Banks have been mobilizing their staff to talk about infrastructure and the development of the corporate debt market, mainly in local currency,” said Sergio Foldes, deputy managing director of BNDES’ international division.
Meanwhile, the perception of the external environment is also more benign. “The feeling is that the worst is behind us,” said Foldes. “The market has already showed signs of recovery, maybe not in a very strong manner, but turmoil has certainly abated. China seems to be going through a trouble-free transition,” he said.
Following a lukewarm reception to its broad infrastructure projects last year, the Brazilian government has improved the terms of the private sector’s involvement and has pledged higher rates of return on investment. As the global environment is still characterized by low interest rates and high exchange rate volatility, investors are looking for diversification. The search for yield among investors will also help attract funds, he said.
“Pension funds, asset management companies and insurers have to have a greater risk appetite to get the required return to meet their mandates. There is a growing interest not only from investors but also from banks that seek to structure deals that may take advantage of the new regulatory framework and the legislation, that grant a series of incentives for investment in infrastructure,” Foldes said.
BNDES is also adapting its financing models to speed up future financial deals. “Exposure to currencies such as the [Brazilian] real – among other currencies from emerging markets – and the concept of local currency denominated debt have increased substantially,” he said.
Today Brazilian companies have ample access to financing in dollars, and this still continues to be relevant, said the BNDES official, but they are also looking for alternatives in local currency debt. The experience of other Latin American financial markets, such as Chile and Peru, may serve as a reference, he said. “In these countries, companies already manage to tap the capital markets in local currencies for deals of longer maturity. Such migration of local investors, institutional investors and pension funds towards these assets is much greater than in Brazil, and we now have the opportunity to do the same.”
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