Keeping the Power On
Will the lights go out in Latin America? Maybe not, but the prognosis at LatinFinance's roundtable on infrastructure finance in Brazil, wasn't hopeful.
Economic growth requires more electricity - and
railways, roads, ports, pipelines and other costly projects.
With governments short of cash, politicians want the private
sector to plug the gap even though the mechanisms to make that
happen are not in place. Financiers have come up with inventive
solutions in the past. They may have to do so again.
Lost Bets The 1994-2002 administration of President Fernando
Henrique Cardoso privatized electricity distribution and some
generation and transmission. Although regulations were not in
place and the privatization unfolded on a piecemeal basis,
investors took a gamble. They also carried heavy
foreign-exchange risk since they financed the acquisitions and
subsequent investments in dollars, while their receivables were
in reais. When the real lost one-third of its value in January
1999, those bets went badly wrong. US and European companies
lost billions of dollars. The landscape worsened with the
energy crisis of 2001,...
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