Ample Space for Private Financing: Coutinho

There will be plenty of room for private sources to fund a coming “big wave” of infrastructure investment in Brazil alongside BNDES, Luciano Coutinho, the state development bank’s president, tells LatinFinance. “The main hindrance for the big participation of private forces in long-term finance was the very high short-term interest rates in Brazil. Turning this page was the big novelty. This idea that the BNDES is ‘crowding out’ usually comes from economists that do not know how the market works,” the official says. Coutinho explains the share of financing for infrastructure based on financial instruments will grow fast in the coming years, and reach “at least 20%-30% of the long-term financing market,” now that Brazilian investors are forced to diversify investment away from government paper. “In this way, BNDES’s absolute size will not shrink because the overall pie is growing. But almost all the addition of demand, the financial expansion, must be met by the market,” Coutinho says. The bank will seek ways to share financing of large individual projects. “Initially we will try at the minimum of 10%–15% or even more if the market has the appetite for the projects, either through long-term bonds or long-term credit. We’re also engaged in structuring infrastructure funds… we can be a minority partner, taking 10%-15% position in funds, so as to help the investment banks to structure private equity or other funds,” he says. Legislation such as that creating infrastructure debentures, as well as a PPP concession model successful in the electricity sector that can be applied to other areas, are other developments that should lure more private investment. Brazil must add another $40bn-$50bn per year in infrastructure investment, brining the total from 19% of GDP to 21% or more, Coutinho says.