Goldman signals Brazilian focus
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Goldman signals Brazilian focus

Investment bank steps in as BNDES stops crowding out; an important first in local-denominated financing of large project puts down marker.


As seen on the 50-real note

Goldman Sachs believes that the changing role of BNDES in Brazilian infrastructure finance will lead to a boom for it and other private-sector financiers.

The bank, which appointed the former president of BNDES Maria Silvia Bastos Marques as its country president in February, has been preparing for the end of the ‘crowding out’ effect of the development bank as Brazil’s fiscal challenges lead to lower public-sector financing.

“With the current macro-economic environment and fiscal situation in Brazil, BNDES is becoming more selective in terms of how it supports various companies and projects, and the pricing it provides,” says John Greenwood, managing director and co-head of project, infrastructure and principal finance at Goldman Sachs in Brazil.

This shift, he argues, has already opened the door for the private sector.

BNDES, the Brazilian state development bank, has recently begun shifting towards charging a market rate interest rate and has signalled that any subsidies will be targeted at assets that have a role in social provision and will not apply to sectors that should be able to attract private finance.

The Brazilian government had also helped to attract private financing for infrastructure projects in the country with a law (12,431) passed in 2011 that provides withholding tax relief to private investors in debentures financing such projects.

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