Brazil targets inbound investors with privatisation plan
At a time of declining global cross-border activity, Brazil is bucking the trend, rising to eleventh in the league of top target markets for inbound investment and for several reasons.
The devaluation of the Real means assets are increasingly attractive to foreign investors, while the lowering of interest rates to 4.5% as of December 2019 is helping local banks to finance deals on attractive terms.
A huge programme of proposed privatisations is in the pipeline, drawing interest from a range of international investors, including corporates, PE, infrastructure, pension and sovereign wealth funds.
At the federal level, over 100 companies are lined up for sale, while, within key states such as São Paulo and Minas Gerais, power distribution, mining, toll roads, and water and sanitation companies could also be on the slate.
The sell-off process has been boosted by a Supreme Court decision in June allowing state companies to dispose of subsidiaries without Congressional approval.
On top of that, BNDES, the national development bank, is selling up to 80% of its assets worth USD29bn, and Petrobras, the oil giant, continues to divest through direct disposals or capital market issues.
The Bolsonaro government remains controversial and Brazilian politics continues to be rather volatile. But investors appear confident that deregulation and the marketfriendly policies it is implementing will continue to yield opportunities and further increase foreign direct investment before the next round of presidential elections in 2022.