Brazil's national development bank, BNDES, is set to ramp up its funding for infrastructure projects by two-thirds this year, directing 20 billion reais ($4.1 billion) mainly through the acquisition of local debt issued by companies investing in the sector. This strategy, announced on Wednesday, is designed to encourage private investors to participate in the purchase of infrastructure bonds, thereby amplifying the impact of BNDES's financing.
The bank has already disbursed around 12 billion reais for infrastructure projects this year, matching the total amount provided throughout 2022. Approximately 60% of these funds were channeled into the acquisition of infrastructure bonds. The bank's active role in helping infrastructure companies attract capital markets has become increasingly important as these companies often face difficulties securing long-term financing from capital markets.
One notable example of BNDES's efforts is its assistance to Igua, one of Brazil's largest sanitation companies. The bank helped Igua secure 3.8 billion reais through the issuance of local infrastructure bonds with maturity periods of 20 and 29 years, acquiring 1.8 billion reais of this amount itself.
BNDES has also been pivotal in procuring debt from companies needing additional resources to complete concession projects due to escalated costs following the pandemic-induced surge in raw materials prices. For instance, BNDES secured 60% of a 520 million-real issuance for a road concession project in Minas Gerais.
Moreover, BNDES is prepared to assist road concession firms struggling to meet contractual obligations. Currently, about one-third of Brazil's privately managed roads, spanning approximately 14,000 kilometers (8,700 miles), are operated by companies facing financial difficulties. The government is currently in discussions with the country's audit court to devise a solution that avoids putting troubled concessions up for new auctions, which would further delay investments.
BNDES is actively participating in these discussions and stands ready to financially support these companies once there is regulatory clarity. This move underscores the bank's commitment to bolstering Brazil's infrastructure sector amidst challenging economic times.
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