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Lower interest rates overseas could benefit Brazil’s infrastructure

The Brazilian minister said the country is ready to receive investment

Published in 09/10/2019 - 19:24

By Pedro Peduzzi Brasília

Brazil’s infrastructure may benefit from the reduction in interest rates overseas. In the view of Infrastructure Minister Tarcísio Gomes de Freitas, this landscape represents a window of opportunities for the country in its efforts to become a more profitable option for foreign investors. For this to happen, he argued, Brazil must continue to unveil “organized, sophisticated” projects, following well planned strategies.

“We’re going through an extremely interesting and favorable moment, where the world has been shrinking and losing speed. This represents an opportunity to us. The slowdown comes as a result of political polarization, population aging, and trade war. This has prompted a response from central economies in the form of lower interest rates. As a result, our [infrastructure] projects prove rather attractive,” Freitas said at the Seminar on Competitiveness in Infrastructure, on Wednesday.

 

O ministro da Infraestrutura, Tarcísio de Freitas, participa de leilão de concessão da rodovia BR-364/365, que liga o Estado de Minas Gerais e o Estado de Goiás, na B3, em São Paulo.
OInfrastructure Minister Tarcísio Gomes de Freitas. - Rovena Rosa/Agência Brasil

Outstanding yield

To seize this opportunity, Freitas has urged his team to work with “diligence” towards “establishing and building better projects.” The yield, he noted, has been outstanding.

“What we’ve been hearing [from international investors] is that projects have been organized and sophisticated. But what matters is that it’s not a randomly selected set of projects. These are projects with the potential to revamp logistics and infrastructure, which should meet our strategic objectives and structural policy perfectly. They’re expected to serve to restore balance the [transport] network as we’ll have a greater participation of railway and water transport, with the growth of cabotage navigation,” he argued.

To an audience of infrastructure specialist, the minister said that the government expects to hold a number of auctions by 2022 to hand over several enterprises to the private sector. Plans encompass 41 airports, Freitas reported, plus 16 thousand km of roads, over 3 thousand km of railways, dozens of port lease contracts, in addition to the privatization of dock companies.

“In the railway arena, we’ve been considering 16 different projects, and we have given them a hierarchy, with a focus on whatever makes more sense. That’s how we built our railway strategy. A full-fledged business environment is being created to provide investors with a feeling of security,” he said.

In this connection, topics including taxes on capital earnings, foreign exchange risk, environmental licensing, arbitration, and conflict resolution in long-term contracts have been brought under scrutiny.

Public investment

The amount spared with the fiscal exercise, the minister said, may at a later date favor public investment in enterprises little appealing to the private sector.

“As we work to transfer assets to the private enterprise, we’ll increase the bulk of public investment. We’re doing the necessary fiscal exercise to increase our fiscal leeway, offer market predictability and deliver infrastructure, especially in areas where the private enterprise will not reach,” he explained.

Translation: Fabrício Ferreira Edition: Aline Leal / Augusto Queiroz

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