Brazil looks to speed up bond issues for road and rail projects

Brazil's transport ministry plans to speed up approvals of so-called infrastructure debentures to finance highway and rail projects.

The ministry wants to reduce the approval period from two months to just five days. As the bonds enjoy tax exemptions, issues require prior government authorization.

The ministry also imposed a requirement for such debentures to be authorized only for projects aligned with the environmental agenda, including "investment in mitigation of greenhouse gas emissions, the energy transition or implementation and adaptation of infrastructure for climate resilience, with a view to adapting to climate change."

The new framework for issuing debentures was published by the ministry in the official gazette and can be seen at this link. 

"This government decision is likely to encourage the railway sector to issue more debentures to finance its projects and have a positive effect on the entire chain, including the locomotive and wagon industry, which is prepared to produce equipment with low levels of greenhouse emissions," Vicente Abate, president of rail equipment manufacturers' association Abifer, told BNamericas.

Tax-exempt debentures are becoming one of the most important financing mechanisms in Brazil for companies and projects in the areas of infrastructure, sanitation, electric power and oil and gas.

In the first half of the year, debenture issues totaled 64bn reais (US$11.7bn), according to local financial market entities association Anbima.

"Debentures are important and several companies in the railway sector are already evaluating issues of this bond, but it's also important that [development bank] BNDES continues in its key role in financing and structuring rail projects," said Abate.