Brazilian infrastructure: where are the margins?

The latest sign of the bottomless interest in Brazilian infrastructure assets has arrived with a dizzyingly high set of bids for Brazilian airports.

The winning bid to run São Paulo's infamously over-crowded Guarulhos airport, the nation's busiest, was won by Investimentos e Participações em Infra-Estrutura. It paid R$ 16.2 billion -- or nearly five times more than the minimum required bid -- to walk away with the dubious prize.

Increasingly, when you speak to project financiers, you hear the same complaints. Margins for concessions in Brazilian assets in energy, roads and other areas has become so wafer thin that you're better off going elsewhere. Peru and Colombia have put together more attractive investment regimes, for example, while there are plenty of overlooked opportunities in Central America. Moreover, the dominant role of the Brazilian National Development Bank (BNDES) continues to distort the market and favours local bank bids.

Giddy bids for past road concessions in São Paulo show that predictions for usage of public assets is hard to gauge. Amid the euphoria, it will be interesting to see if  Investimentos e Participações em Infra-Estrutura is able to make money on its expensively bought assets.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
This entry was posted in Articles. Bookmark the permalink.

Comments are closed.