Press Release

CAF invests US$25mn in Patria's infrastructure fund

Bnamericas Published: Wednesday, December 21, 2022

This is a machine translation of CAF's press release, originally in Portuguese

December 21, 2022 - With the aim of attracting resources for investment in high social impact infrastructure, CAF, Development Bank of Latin America, approved an investment of US$ 25 million in the Patria Infra Credit Fund. This is CAF's second investment in infrastructure in Brazil, which also granted a guarantee for Line 6 of the São Paulo subway. In common, these operations are aimed at first-line projects and managers and at a priority sector for CAF and Brazil.

The Fund was one of the winners of the public call made by the BNDES in February of that year, which selected a total of 5 infrastructure funds in the debt and equity categories [1] . The business has a strong component of innovation in its structure since, in addition to recycling the Fund's capital in new projects, when selling the securities in the secondary debentures market, it will be in the Project Finance non-recourse model, in which the project's cash flows act as the main guarantee. This format is unusual in Brazil, whose infrastructure market has been gradually reducing dependence on BNDES, but with plenty of room to advance in private credit.

The Fund will provide credit for greenfield and brownfield projects in 4 sectors: energy, telecommunications, mobility, and basic sanitation. “This investment is doubly important for CAF, as it marks our entry into Brazil in the infrastructure sector. This is the second investment in the sector this year, and we intend to expand our participation in infrastructure in Brazil and Latin America in the coming years”, says Jorge Arbache, vice president of the private sector. A traditional investor in venture capital and private equity funds in Brazil, with 10 years of experience, participation in infrastructure still represents a small share of the bank's investment portfolio. Colombia is the country with the highest concentration of investments in infrastructure, and CAF intends to increase its participation in the sector in Brazil, especially via credit funds.

As an institutional investor, CAF has been diversifying its portfolio by investing in new businesses, asset classes and even startups. “We are looking for businesses in line with our strategy of being the green bank in Latin America and making a decisive contribution to the economic recovery of our member countries. We analyze the opportunities as a whole and from that we see the best tool, always in strategic sectors for the institution”, he says.

Headquartered in Caracas, Venezuela, CAF has offices in 10 countries and recently opened an office in São Paulo, dedicated exclusively to activities related to the private sector. “Our objective is for this office to be a hub, capable of carrying out operations with the private sector throughout Latin America from here”, says Arbache. The office was officially opened by the Brazilian Government in November 2022, when it received an official visit from the Brazilian Chancellor. Brazil has been a full member of CAF since 1995 and is currently the 4th largest shareholder, with an 8.7% share.

Located in a prime area of São Paulo, the CAF office will have more than 15 people of six nationalities. “Our DNA is Latin American, and that's why we need people from different countries with different experiences. This interaction generates knowledge and differentiates us through learning from other countries, in the most different projects”.

This investment is part of CAF's strategy to increase its private sector portfolio, with special attention to projects with a green component. “We are evaluating more than 10 opportunities in infrastructure funds, in the most diverse sectors. In addition, we also want to participate more actively in investment alternatives in the bioeconomy in general, mainly in forests and in the carbon market.”

Considering the high uncertainty of greenfield projects in Brazil, private banks traditionally avoid this type of structure, which increases the relevance of the participation of actors such as CAF and other multilateral banks. “CAF's entry into this type of structure encourages other institutions to be interested in participating, attracting more resources to the sector”, says Murilo Marins, executive who led the operation. The ability to mobilize resources is one of the classic functions of development institutions, which seek to direct third-party resources to priority projects for economic growth and development.

Several studies point out that Brazil needs to invest something between 4 and 5% of GDP in infrastructure to close the existing gaps. Recently, events such as the approval of the Sanitation Framework, the consolidation of the incentivized debentures market, and the remodeling of auctions and infrastructure concessions, among others, attracted investment funds to the sector. “The infrastructure deficit in Brazil is very large and the need for investment is greater than the offer. It is a long-term job and will require a lot of resilience”, concludes Arbache.

About CAF

CAF - development bank of Latin America - has the mission of promoting sustainable development and regional integration, financing projects in the public and private sectors, providing technical cooperation and other specialized services. Founded in 1970 and currently formed by 21 countries -19 from Latin America and the Caribbean, together with Spain and Portugal- and 13 private banks, it is one of the main sources of multilateral financing and an important generator of knowledge for the region. More information at www.caf.com .

About Patria Investimentos

Patria is a leading alternative investment firm focused on Latin America, with over 30 years of history and combined assets under management of US$26.5 billion, and a global presence with offices in ten cities on four continents. Pátria aims to provide consistent returns on attractive long-term investment opportunities that allow portfolio diversification through its Private Equity, Infrastructure, Credit, Public Equities and Real Estate products. Through its investments, Pátria seeks to transform industries and clear bottlenecks, generating attractive returns for its investors, while creating sustainable value for society. More information is available at www.patria.com  


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