Brazil’s infrastructure concessions agenda is more likely to achieve traction subsequent 12 months because the financial system is forecast to select up.
The sanitation and freeway segments are anticipated to supply main tasks for traders, however sure dangers persist.
BNamericas talks to Marcelo Girão, head of challenge finance at Itaú BBA, the funding arm of banking large Itaú Unibanco, about dangers and alternatives in 2021.
BNamericas? What’s your expectation for the enterprise setting in Brazil for 2021?
Girão: On the financial facet for this 12 months we’re projecting adverse development of 4.5% and for subsequent 12 months optimistic development of 4%.
The recession this 12 months was not as unhealthy as was being projected initially of the pandemic, within the months of April and Could, and that’s excellent news.
Now for 2021 we’ve to think about that the optimistic state of affairs of development of 4% will even rely on the upkeep of fiscal self-discipline in Brazil. We have now a authorities agenda that’s considerably stalled this month, due to the municipal elections, however as soon as the elections cross, we have to resume the agenda of fiscal self-discipline.
BNamericas: What can we count on for infrastructure?
Girão: Basically, main infrastructure tasks have been postponed to 2021. The schedule for auctions was modified due to the pandemic and lots of will likely be held subsequent 12 months.
Speaking about sectors, airports, which is likely one of the sectors most affected by the pandemic, has auctions deliberate for concessions in each the sixth spherical and the seventh spherical subsequent 12 months. The excellent news is that though it’s a really affected sector, the plan to carry the auctions was maintained.
Two areas that I see as a significant spotlight for subsequent 12 months when it comes to auctions are highways and sanitation.
The railroad trade might have fascinating information with the event of tasks reminiscent of FIOL and Ferrogrão.
Within the space of power, we’ve no auctions this 12 months, so some auctions are anticipated for subsequent 12 months. We’ll solely have the transmission line public sale in December.
Basically, regardless of seeing the postponement of auctions to subsequent 12 months, the infrastructure ministry managed to maneuver ahead on the agenda, approving processes on the TCU [audit court], and advancing the bureaucratic facet of the tasks.
Additionally this 12 months, even throughout the pandemic, we had the approval of the brand new regulation for the sanitation sector, which was essential for a resumption in auctions on this space.
Subsequent 12 months, the restoration of the financial system will likely be very a lot based mostly on the infrastructure sector. There are additionally fascinating developments associated to the opening of the fuel market.
There’s a optimistic expectation however we additionally need to keep in mind that it gained’t be a very tranquil 12 months, we nonetheless have the consequences of the pandemic, there’s the opportunity of a second wave of instances, and we nonetheless have to beat the consequences of the pandemic, which is more likely to solely occur with a vaccine.
Moreover, there’s one essential issue that we’ve to say on the macroeconomic facet. Within the first quarter of subsequent 12 months, we’ll not have the consequences of emergency support paid by the federal government to low-income households, so we will count on a rise within the variety of unemployed and in addition some impact on individuals’s indebtedness, however the monetary sector is provisioned to deal with that.
BNamericas: Initially of the pandemic, with the dramatic drop in demand in numerous infrastructure areas, there was a worry of widespread breaches of contracts, together with concession contracts. How do you consider the problem of authorized safety in Brazil throughout the pandemic?
Girão: We went via some scary conditions, we had some disputes involving the federal government in some localities, even with some bizarre choices, which precipitated some discomfort for traders.
Buyers who’ve been in Brazil for a protracted interval haven’t been so scared, they perceive the dynamic higher.
In a optimistic manner, we’ve seen indicators from the federal authorities that it was open to discussing and adjusting contracts for these sectors laborious hit by the pandemic. That helped enhance perceptions.
BNamericas: You talked about as optimistic highlights subsequent 12 months the sanitation and freeway sectors. Might you develop on that?
Girão: The public sale of [Rio de Janeiro water utility] Cedae is lengthy awaited by market individuals, as a result of it entails dozens of billions of reais in funds and capex. There are investments of a spectacular magnitude and the public sale is being properly structured by [development bank] BNDES, which has talked to all stakeholders. This, definitely, would be the most awaited public sale within the sanitation space in 2021.
Relating to highways, there are some auctions deliberate and my spotlight is the Dutra public sale [the highway between Rio and São Paulo].
Particularly about Cedae and Dutra, we’re working with traders who wish to take part in these auctions.
BNamericas: Basically, what sort of traders are doubtless to have a look at infrastructure property?
Girão: Within the space of sanitation, corporations that already function within the phase, which we name strategic operators. However there’s additionally the opportunity of new entrants within the sanitation space, like concessionaires in different segments, reminiscent of CCR and Equatorial, as they’ve already stated they’re within the phase as properly.
The international investor is more likely to be somewhat extra cautious earlier than coming into the sanitation space as a result of they like to attend a short time to see if the brand new sanitation framework will work.
By way of highways, the place we’ve consolidated guidelines, we see monetary traders as being vital, for instance, at the moment Patria is already one of many largest street operators within the nation.
Railways are nonetheless a sector that I do not see as so clear. We didn’t have auctions for a few years, we have to see which form of traders are going to be extra curious about FIOL and Ferrogrão. The pattern is that it’s extra enticing for corporations that already function within the logistics space.
The power sector is extra dispersed. Because the free energy market will open up, with extra prospects accessing the free market, there’s all kinds of builders in search of renewable power and fuel thermoelectric tasks. In distributed technology there’s huge variety.
Within the port sector, auctions are extra dispersed, normally they’re strategic gamers, verticalizing logistics, wanting on the phase. BR do Mar, which is a invoice that’s linked to the port sector, tends to develop cabotage within the nation. However port tasks undertake extra the mannequin of company finance and never challenge finance.
For airports, I see curiosity from airport operators, in addition to within the city transport sector, the place we just lately noticed Acciona taking over a significant challenge within the São Paulo subway.
BNamericas: With extra optimistic expectations for subsequent 12 months, is the financial institution rising its challenge finance space?
Girão: In the present day we’ve a workforce of 13 professionals and if there’s better demand for tasks, we will rapidly enhance this workforce. Up to now decade, we had greater than 20 individuals working on this space, then that quantity dropped, with the discount in tasks. Lately we began to develop the workforce once more.
BNamericas: What’s the spotlight of the 2021 legislative agenda for the world of infrastructure?
Girão: There are a collection of measures, payments in progress that may transfer ahead, that may enhance the enterprise setting. I might spotlight tasks within the space of modernizing infrastructure debenture guidelines and in addition the brand new concession legislation.