The
investments in the Brazilian infrastructure sector might not only put the
country’s economy on the growth path again, but also develop its capital
market. Looking for ways to boost long-term private funding, the federal
government has granted tax benefits to local and international investors for
products linked to infrastructure projects. The receivables investment funds
(known as FIDCs) are the new bet to increase the private funding in projects
related to highways, railways, ports and airports.
To Ricardo Mizukawa, FIDCs committee coordinator at Brazilian Financial and Capital Markets Association (Anbima), the potential is huge due to the infrastructure investments needs in Brazil.
Brazil
invested 2.2% of its GDP in infrastructure last year, and the government’s
target is to reach 4% in the next three or four years, which means investments
need to almost double in that period.
Several
recent changes have made this type of investment more appealing to foreign and
local investors, and fund managers as well.
The
Brazilian receivable investment funds are similar to other consumer loan
securitization funds around the world. It is backed by trade receivables,
credit cards, auto loans and other assets. FIDCs have often at least two
classes of shares: senior and subordinated. The originator usually remains the
subordinated class and it is responsible for taking on possible losses. The senior
shares are offered to public investors.
Although
FIDCs are not new in the Brazilian market, the legislator granted tax-exempt to
receivable funds linked to infrastructure projects only at the end of 2012. According
to Anbima, BRL 3.7bn (USD 1.5bn) are invested in infrastructure FIDCs of a
total of BRL 213bn (USD 94bn) as a whole.
The
assets that compromise the portfolios are generally acquired with a discount,
which provides investors higher yields compared to other investments linked to
interest rates. Besides that, as the portfolios usually contain
receivables from a variety of debtors, the fund can be ranked higher than the
company.
To
have the tax benefit, the fund must be organized as a closed-end portfolio, and
the originator or assignor of the receivables cannot be a financial
institution. Before going to the market, the assets need approval from the
government, and after the money is raised, it must be channeled into investment
projects in infrastructure. The receivable investment funds must also pay fixed
interest rates or be linked to a price index or even to a reference rate.
Post-fixed interest rates are forbidden.
According
to the legislation, if the sources are not allocated into the project, the
receivable’s assignor will be fined 20% of the amount raised. The duration must
be at least six years and the principal invested cannot be paid within the
first two years from the close date of the offering.
A FIDC with multi assignors makes this product very attractive because it brings diversification
to the portfolio and improves the portfolio’s rating.
