LatinFinance - September/October 2013 - 60

to the highest bidder, but to the group
most committed to charge the lowest
rates to users. the 25-year BnDeS-backed
concessions include a five-year grace
period, while BnDeS financing at below
financial market rates can amount to
70% of the package, excluding real estate
expropriations.
non-BnDeS financings will depend
“largely on the economic viability of the
concessions,” says andrew Janszky, head of
the latin american practice at milbank in
São Paulo.
No one size fits all
market participants acknowledge that
improvements have been made, mainly in
terms of the provision of state guarantees.
Yet many still say the government initiatives
are not enough to overcome the stumbling
blocks that faced past programs.
the package “is quite interesting for all
the players,” says Rui Gomes Junior, head
of project finance at Bradesco, noting as
positive the fact that the BnDeS is willing
to attract more private capital to finance
infrastructure concessions. But there are
lingering concerns, however, that the
government intends to cap rates of return
for market players.
Says alberto Zoffmann, project
finance director at itaú BBa in São Paulo:
“We understand the objective of the
government, but the fact is that it is putting
a maximum spread of 2% [over the tJlP,
the BnDeS benchmark long term interest
rate] and this cannot be suitable for some of
the projects.”
Zoffmann says he is encouraged that
the state is showing flexibility in terms of
guarantees and other conditions. But he
is concerned by what he sees as attempts
by officials to put incorporate too many
elements in a single bidding package — for
example, with rules governing maximum
interest rates — without due consideration
of the nature and requirements of the
project at hand. He says that such onerous
rules may even fall foul of some banks’
compliance regulations.
State officials are clear, though, that
limits must be in place at the outset to
prevent higher costs being passed to the
public. “it has already been decided that
the final cost cannot go beyond 2%, because
at the end of the day, if the cost increases,
the rates that the users will pay will increase
as well,” says nelson Siffert, the manager
of the infrastructure department at the
BnDeS. “there is an understanding that

60 l atinfina nce.com - September/October 2013

Luciano coutinho, BnDES

“These concessions
are long-Term
commiTmenTs, in
[Brazilian] real.
These projecTs are
financed and sTrucTured in reais, Brazilian operaTors
and enTrepreneurs
are ready To seek
These opporTuniTies
– in several cases
in parTnership wiTh
foreign operaTors
in Terms of direcT
invesTmenT (in eq uiTy)”

infrastructure is of public utility, and the
government is seeking to get a reasonable
rate for users.”
Siffert nevertheless expects private
sector financiers will find the concession
scheme attractive not only for the returns
available but also because many projects
entail a diversification of financial products,
including, in some cases, the issuance of
debentures.
in the meantime, the BnDeS is looking to
boost domestic capital markets, especially
through the issuance of debentures.
foreign investors were exempted from
income tax on infrastructure debentures —
specifically, on domestic bonds offering tax
advantages for buyers when proceeds are
used for capital expenditure — two years
ago. and so far, a handful of issuers have
taken advantage of the new rules.
Says Siffert: “We are introducing a
novelty now in order to boost the capital
markets so they can support infrastructure
projects, including private concessions, in
Brazil.”
Under the BnDeS plan, if an SPe
agrees to issue debentures, it stands to
benefit from a change in methodology for
calculating amortizations — known as the
“price system”— that would allow it greater
leverage. a project with 65% leverage, for
example, could get 75% under the revised
methodology. Such debentures could
account for around 12% of total capex of a
given concession, Siffert says.
Such an approach, however, may not be
good enough. a survey by itaú BBa suggests
that the system might work for some
projects, but not all.
Zoffmann points out that an SPe can
increase its leverage by 10-12% by issuing
debentures. Under the Price system, this
number would increases to 15%, whereas
that same figure could be as high as 20% if
financing is done on a case by case — and
not “one size fits all” — basis. “the BnDeS
needs to be more flexible,” he says.
Competing with plain vanilla
complicating matters further are
government changes this year to
investment taxes. foreign investors in
infrastructure debentures had benefited
from preferential tax treatment since 2011,
but that incentive was undermined — albeit
inadvertently — when the government
scrapped iof taxes for foreigners earlier
this year.
Without an incentive for investors to buy
infrastructure debentures, their appeal for


http://www.LATINFINANCE.COM

LatinFinance - September/October 2013

Table of Contents for the Digital Edition of LatinFinance - September/October 2013

Latin Finance - September/October 2013
Contents
Front notes
People news
Debt news
Equity news
M&A news
After the storm
Advantage Mexico
Treading water
New structures
Mexico
Regaining the Initiative
Deficit Ahead
Building up
Switching Course
Brazil
Work in progress
Extreme makeover
Mind the gap
Brazilian life insurance
Andean
Breaking the fall
Reaching out
Market movers
Paraguay
Smoothing the cycles
Thinking big
Parting Shot
LatinFinance - September/October 2013 - Latin Finance - September/October 2013
LatinFinance - September/October 2013 - Cover2
LatinFinance - September/October 2013 - Contents
LatinFinance - September/October 2013 - 2
LatinFinance - September/October 2013 - 3
LatinFinance - September/October 2013 - Front notes
LatinFinance - September/October 2013 - 5
LatinFinance - September/October 2013 - People news
LatinFinance - September/October 2013 - 7
LatinFinance - September/October 2013 - Debt news
LatinFinance - September/October 2013 - 9
LatinFinance - September/October 2013 - Equity news
LatinFinance - September/October 2013 - 11
LatinFinance - September/October 2013 - M&A news
LatinFinance - September/October 2013 - 13
LatinFinance - September/October 2013 - 14
LatinFinance - September/October 2013 - 15
LatinFinance - September/October 2013 - 16
LatinFinance - September/October 2013 - 17
LatinFinance - September/October 2013 - 18
LatinFinance - September/October 2013 - 19
LatinFinance - September/October 2013 - 20
LatinFinance - September/October 2013 - 21
LatinFinance - September/October 2013 - 22
LatinFinance - September/October 2013 - 23
LatinFinance - September/October 2013 - After the storm
LatinFinance - September/October 2013 - 25
LatinFinance - September/October 2013 - Advantage Mexico
LatinFinance - September/October 2013 - 27
LatinFinance - September/October 2013 - Treading water
LatinFinance - September/October 2013 - 29
LatinFinance - September/October 2013 - 30
LatinFinance - September/October 2013 - New structures
LatinFinance - September/October 2013 - 32
LatinFinance - September/October 2013 - 33
LatinFinance - September/October 2013 - 34
LatinFinance - September/October 2013 - 35
LatinFinance - September/October 2013 - 36
LatinFinance - September/October 2013 - 37
LatinFinance - September/October 2013 - 38
LatinFinance - September/October 2013 - 39
LatinFinance - September/October 2013 - 40
LatinFinance - September/October 2013 - Mexico
LatinFinance - September/October 2013 - Regaining the Initiative
LatinFinance - September/October 2013 - 43
LatinFinance - September/October 2013 - Deficit Ahead
LatinFinance - September/October 2013 - 45
LatinFinance - September/October 2013 - Building up
LatinFinance - September/October 2013 - 47
LatinFinance - September/October 2013 - 48
LatinFinance - September/October 2013 - 49
LatinFinance - September/October 2013 - 50
LatinFinance - September/October 2013 - 51
LatinFinance - September/October 2013 - Switching Course
LatinFinance - September/October 2013 - 53
LatinFinance - September/October 2013 - 54
LatinFinance - September/October 2013 - 55
LatinFinance - September/October 2013 - 56
LatinFinance - September/October 2013 - Brazil
LatinFinance - September/October 2013 - Work in progress
LatinFinance - September/October 2013 - 59
LatinFinance - September/October 2013 - 60
LatinFinance - September/October 2013 - 61
LatinFinance - September/October 2013 - Extreme makeover
LatinFinance - September/October 2013 - 63
LatinFinance - September/October 2013 - 64
LatinFinance - September/October 2013 - 65
LatinFinance - September/October 2013 - 66
LatinFinance - September/October 2013 - Mind the gap
LatinFinance - September/October 2013 - 68
LatinFinance - September/October 2013 - 69
LatinFinance - September/October 2013 - Brazilian life insurance
LatinFinance - September/October 2013 - 71
LatinFinance - September/October 2013 - 72
LatinFinance - September/October 2013 - Andean
LatinFinance - September/October 2013 - Breaking the fall
LatinFinance - September/October 2013 - 75
LatinFinance - September/October 2013 - 76
LatinFinance - September/October 2013 - Reaching out
LatinFinance - September/October 2013 - 78
LatinFinance - September/October 2013 - 79
LatinFinance - September/October 2013 - 80
LatinFinance - September/October 2013 - 81
LatinFinance - September/October 2013 - Market movers
LatinFinance - September/October 2013 - Paraguay
LatinFinance - September/October 2013 - Smoothing the cycles
LatinFinance - September/October 2013 - 85
LatinFinance - September/October 2013 - Thinking big
LatinFinance - September/October 2013 - 87
LatinFinance - September/October 2013 - Parting Shot
LatinFinance - September/October 2013 - Cover3
LatinFinance - September/October 2013 - Cover4
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