The year to June 2023 was a tumultuous period for Brazil’s infrastructure markets, with a polarized election, interest rate volatility and a tricky external environment creating challenges for project sponsors, their banks and advisors.

Despite this, Itaú BBA, which wins the award for Infrastructure Bank of the Year – Brazil, still managed to participate in many of the most important infrastructure deals that closed in Latin America’s largest economy.

In the twelve months of the award period, Itaú BBA took part in deals that raised 54.1 billion reais ($10.94 billion) in the energy, infrastructure and project finance sectors, according to the bank’s managing director of project finance, Marcelo Girão. Two thirds of the projects were in the oil and gas and energy sector, with the remainder in other infrastructure sectors.

Projects where Itaú BBA played a key role included the project financing for toll road Ecovias do Araguaia, which won the award for Local Currency Deal of the Year. Itaú BBA acted as financial advisor on that deal.

The bank was also a part of a consortium that provided a $250 million bridge loan to ODATA, a data center group whose acquisition by Aligned, a US digital infrastructure firm, won the award for Digital Infrastructure Financing of the Year.

The bank’s standout performance took place against a challenging backdrop for infrastructure financing in Brazil. But Girão points out that the second half of 2022 was better than expected, as investors, issuers and sponsors shrugged off the risk associated with the general election, thus keeping domestic capital markets open.

“The market and investors understood that, no matter who won the election, the Brazilian institutions would remain,” he says.

But a lull came after president Luiz Ignácio Lula da Silva took office in January. Uncertainty over the direction of fiscal policy, together with two large adverse credit events involving retailer Lojas Americanas and power utility Light, spooked investors.

“The market became very apprehensive and almost came to a halt in the first quarter,” Girão says. “But the second quarter was a little better, and we expect the market to regain steam as the months go on.”

Looking forward, he sees a more positive outlook for infrastructure investment in the country, so long as the regulatory environment remains stable. Noise from the administration on issues like the legal framework for water and sanitation investments and the role of supervisory agencies in the energy sector have not had much of an impact on market sentiment, though no significant change has yet taken place. Girão also says that, if the government’s tax reform and the new fiscal framework bear fruit, investments could receive a further boost.

“There will always be a pipeline of projects in Brazil, as the infrastructure gap is huge,” Girão says. “If the regulatory environment is robust and there is legal security, there will be no lack of funding.”