Public Law, Project Finance and Regulatory

Bolsonaro seeking approval of infra bonds bill before elections

Brazil’s government is working behind the scenes to obtain congressional approval of a bill extending tax breaks for infrastructure financing through bonds, known locally as debentures.

President Jair Bolsonaro wants to secure approval before the upcoming general election.

Brazilians go to the polls in October to vote for president, lawmakers and state governors, and congress enters a transition phase after the election that makes approval of any bill very difficult for several months.

The bill was approved by the lower house in July 2021, but it remains stuck in the senate.

The delay is due to a disagreement regarding one item in the bill, namely that guarantees would be provided to debenture creditors.

The Bolsonaro administration and the senate are now close to an agreement on this issue, a government representative told BNamericas, who spoke on the condition of anonymity.

Infrastructure debentures provide tax exemptions for individual investors and the new bill extends this benefit to companies that issue such bonds as well as to pension funds, including those from abroad.

“This extension of tax benefits for infrastructure debentures is very welcome because infrastructure projects still rely heavily on financing from state-run banks and multilateral institutions,” Paulo Dantas, an infrastructure and project finance specialist at law firm Castro Barros Advogados, told BNamericas.

“Debentures gaining scale can be complementary to project finance operations. The new challenge, once these new rules are approved, will be to also develop the secondary market for debentures, providing liquidity to investors,” he said.

Infrastructure debentures are used to finance projects in a wide range of sectors, including energy, sanitation, transport, streetlighting and telecom.