Infrastructure investments seen firm despite US$30bn federal budget cut

Monday, February 21, 2011

Brazil's infrastructure sector is unlikely to be seriously affected by the 50bn-real (US$30.0bn) federal budget cut announced by the government in February, Fernando Gentil, director of the Brazilian branch of US private equity firm Darby Overseas Investments, told BNamericas.

"Looking at the big picture, it's a good decision. As a private investor, I expect its impact on infrastructure investment to be mediocre," Gentil said.

"Look at national development bank BNDES. It's one of the largest credit providers and continues to function with or without budget cuts," Gentil added.

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For 2011, Brazil's government has earmarked a total of 171bn reais for infrastructure, of which 40.2bn reais will come from growth acceleration plan PAC.

While the government has pledged not to cut PAC funds, there is enough private capital to go around, the executive added. BNDES president Luciano Coutinho has said he expects private bank lending to improve during 2011.

On average, only 20% of Brazil's infrastructure investments come from project operators, while the remaining 80% are funded by financial institutions.

Darby, a division of Franklin Templeton Investments, manages some US$2.6bn in assets. The firm completed fundraising for its Brazil Mezzanine Infrastructure Fund in 2008, with total capital commitments of 388mn reais.