Brazil Hikes Rate to Woo New Investments
World Economy

Brazil Hikes Rate to Woo New Investments

Brazil raised the rate of return on new highway concessions and will do the same for other infrastructure projects to woo much-needed investment into the sluggish economy, a senior government official said.
The government hiked the rate of return for highways to 9.2% from a previous 7.2%, marking a change in stance by President Dilma Rousseff, who has been criticized for scaring off investors with below-market rates of return, Reuters reported.
Deputy Planning Minister Dyogo de Oliveira said in an interview the government will raise internal return rates on port, airport and railroad projects as financing costs climb in Brazil.
“The cost of capital in Brazil has increased and the IRR has to reflect that. We will review the IRR for other modalities,” Oliveira said. “Without a doubt a higher IRR makes those projects more attractive for investors.”
Facing an imminent recession, Rousseff has adopted more market-friendly policies to lure investors to her new 198.4 billion reais ($62.61 billion) plan to overhaul the country’s decaying infrastructure.
The IRR is a measure of return on an investment that takes both the size and timing of cash flows into account. The final return rate could fluctuate depending on the highway project and its capital structure.
Oliveira said he will discuss financing options to the projects with the World Bank and Inter-American Development Bank in a trip to the United States next week. The two multilateral lenders are willing to issue debt in the local currency to finance some of the concessions, Oliveira said.
The government plans to auction four roads this year as part its plan to sell 4,371 kilometers (2,716 miles) of highways to reduce steep transportation costs that drive up the price of commodity exports.
With the new plan, the government expects 66.1 billion reais in investments in highways, 86.4 billion in railroads, 37.4 billion in ports and 8.5 billion in airports. Auctions for the airport concessions will start in the first quarter of 2016.
A previous effort by Rousseff to lure 210 billion reais in private investment in 2012 managed to attract only about 20% of the targeted funds, with no bidders at all for the 14 railroads and 160 port terminals on offer.

Short URL : http://goo.gl/E0vR8o

You can also read ...

Capital Economics forecasts Turkey’s GDP growth will fall to 3.5% in 2018 from 7.4% in 2017.
Expectations for Turkey's end-2018 inflation rate rose from 12...
Trump Tactics Sabotaging US Economy, Markets
Wall Street could be making a costly mistake. According to...
File photo of finance ministers and central bankers from the G20 nations.
Global economic growth is poised to pick up this year, though...
Apple Watch Smells Losses
The latest round of US tariffs on $200 billion of Chinese...
Italian Bonds, Stocks Fall
Italian bond yields rose and equities sold off on Friday after...
Technology Can Help Workers From the Informality Trap
Technology and what it will do to change how people work is...
Moody’s Warns Philippines of Downside Risk
Debt watcher Moody’s Investors Service on Friday said the...
A weaker yuan remains a source of risk for global currency markets.
The Chinese yuan slid to its lowest in more than a year on...