Brazil infrastructure: Redemption road

Nov 1, 2012

Brazil's bold infrastructure push has been heralded as a game changer. Investors, however, may balk at low yields and risks that remain hard to evaluate

By John Rumsey

Much fanfare has accompanied Brazil's announcement of an ambitious $133 billion reais ($66 billion) infrastructure investment program. A new law to jumpstart long-term debentures has raised hopes that the private sector will finally prove a key player in the sector.

But the market may prove less attractive to foreign investors than the hype would suggest.

Law 12,431, which finally passed in an amended version as law 12,715 on September 17, was greeted with enthusiasm. It provides tax breaks to investors when they invest in debentures with tenors over four years.

The amendments are well written and addressed the doubts of investors over liabilities for non-compliance with government conditions on tax exemptions, for example, says Marcelo Leitão, head of debt capital markets at the São Paulo office of Portuguese bank Banco Caixa Geral.

"This is an important event. A series of issuers has been waiting for this...

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