When it comes to advising on financial transactions in Brazil, Pinheiro Neto has been the name of reference over the past year.
Having worked on transactions such as environmental management company Ambipar’s $500 million inaugural international green bond, the $2.6 billion follow-on that sealed the privatization of water and sanitation company Sabesp and the $2 billion issuance that marked the entry of Brazil into the sovereign sustainable bond market, Pinheiro Neto’s fingerprints could be found on many of the landmark transactions out of Brazil during that timeframe.
The firm’s extensive banking and finance team was hardly twiddling its fingers over this period. Partner Fernando Meira notes that Brazil’s capital markets performed beyond expectations despite a lack of IPOs or much significant equity activity beyond the Sabesp deal.
“Talking to clients, some are giving up on the idea of pursuing IPOs, while others want to be ready because, in Brazil, markets move from one extreme to another very quickly,” he says. “But, in general, capital markets performed well in 2024, and that was a happy surprise for us.”
The outstanding performer was the fixed income market, boosted by an increase in demand for debentures that enabled issuers to tighten spreads. Meira says that October’s surprise upgrade in of the sovereign’s rating by Moody’s from Ba2 to Ba1, a step closer to investment grade, also helped market sentiment, and new regulation implemented by CVM, the securities regulator, reduced barriers for companies to raise money by issuing debt in local currency.
Brazil’s perennial fiscal frailties nevertheless cast a shadow over the market, as doubts remain among investors about the willingness of the government to cut expenditure to reduce its deficit.
“The government has not signalled to have an appetite for austerity,” Meira says. “We will have to follow the fiscal questions and how it will impact market confidence. If they try to once again to relax the fiscal side, the impact will be very negative.”
As a firm, Pinheiro Neto is still confident that capital markets will continue to develop in Brazil, both in size and in complexity, which will require ever more expert legal advice from all participants on transactions.
“As the market gains sophistication, it makes a triage of financial and legal advisers that can really bring the level of security demanded,” Meira says. “I believe 2025 will be a good year for us again. But it can always be better, if we at some point go point to a more benign scenario of lower interest rates and an excess of liquidity.”