Brazilian project financing is rebounding with capital markets registering a record high of issuances again this year. Yet, large-scale projects are having difficulties accessing foreign capital in Brazil, a local currency market, panelists at IJLatAm 2024 in Miami said.

The panelists emphasised the need for clear and all-encompassing regulation in order to attract foreign investments.

“We don't have enough funds in Brazil. We’re not an OECD country and our projects are different from the Latin American markets like Chile, Columbia, because most of them are BRL-denominated,” said the chief investment officer of a Brazilian fund.

Capital intensive projects like utility-scale generation projects have had difficulties accessing foreign capital. One of the reasons are the power purchase agreements (PPAs) most often than not denominated in local currency.

“It's always good to invest in US dollar projects, but it's not easy. On the energy side, we have been able to do some generation utility scale solar projects with long term contracts in USD, but we had some challenges,” said the chief investment officer of a Brazilian fund, adding that the government was working on a hedging structure so they could make it easier and less costly to access capital markets outside of Brazil, especially for large projects.

The regulatory framework around transmission has made for one of the best transmission business models according to some panelists, helping to favour investments in the sector.

“Transmission is so successful, it's a framework that has been working for more than 20 years and is very stable. We have changed the power generation regulatory framework about 3 or 4 times in the ways that the auctions occur. But transmission has been the same,” said a director at the Brazilian development bank.

BNDES remains a major asset across infrastructure and energy transition sectors. The bank leads renewable investments and has proven especially instrumental in supporting projects with long-term financing which is not available in capital markets.

“We will need better access to international capital markets to get that amount of funding, which is definitely much larger than what we have in Brazil. Not all answers will come from BNDES,” said the chief financial officer of an infrastructure company.