Funding the Brazil Oil Supply Chain

Apr 1, 2011

With huge infrastructure needs in the next few years, Brazilian issuers are innovating to fund participants in the oil supply chains and other infrastructure channels.

by Ben Miller

Petrobras has clearly telegraphed that it needs more than $250 billion to exploit pre-salt oil deposits over the next five years, and investors appear keen to participate. Less clear is how to secure funds for the legion of engineers, manufacturers and service providers supporting the projected oil boom.

There are more than 5,000 companies of all sizes serving and supplying Petrobras, according to Marcilio Miranda, a consultant at the Brazilian state oil producer. Together, they will need about $40 billion in capital per year during the next five years, he says. Miranda oversees a program to assist suppliers through transactions using the Fundos de Investimento em Direitos Creditórios (FIDC) structure.

But with the government signaling that BNDES may become less active in the coming years, and local capital markets still considered shallow, it has been hard for these smaller borrowers to move beyond short-term bank financing. In...

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