Foreign bond investors are returning to Brazil as the local capital markets enjoy a stronger-than-expected recovery from the pandemic and credit events at key corporations last year, according to Ricardo Guimarães, CEO of the Brazilian subsidiary of BNP Paribas.
“You see greater appetite for investment in infrastructure, including energy efficiency. Foreign investors in fixed income are coming back to Brazil,” he told LatinFinance. “There really is a positive perception of Brazil compared to the rest of the world. Our view is that it is going to be a very positive year for capital markets.”
The capital markets have proven their importance for corporations as an effective source of funding through the years, Guimarães said.
“Large companies and big investors should access capital markets as the main source of funding. Banks’ balance sheets should rather serve to finance the so-called real economy, such as SMEs and individuals. Regulation has been going in this direction, with the right tools. This has favored an expansion of capital markets,” he said.
NEW DEBENTURES
Brazil has used innovations in debentures to attract investors and issuers. It first created so-called debêntures incentivadas, which grant individual investors income tax exemption. And in the last few months, the government launched a new type of infrastructure debenture, which extends tax exemptions to issuers. Still, this new tool has yet to be tested.
“We have had talks regarding a few projects. Frequent issuers are already using the other type of debentures, and there is still a bit of uncertainty. We will probably see the first issuance of these new debentures at the end of the second quarter or at the beginning of the third quarter,” Guimarães said.
Despite the Brazilian government’s efforts to stimulate growth in sustainable finance, Guimarães said the market is still at “an initial stage of development.”
“We still have limited liquidity for this sustainable finance market,” he said, adding that Brazilian carbon market regulation recently approved helps broaden the market’s infrastructure.