Brazil is entering a new cycle of infrastructure investment, driven by an expanding project pipeline and growing private-sector participation.  The ability to structure sound financial models, properly distribute risks, and offer predictability to investors will be crucial for turning projects into financeable operations and expanding the participation of domestic and international capital.

According to Roberto Vianna do R. Barros, partner in the Banking & Finance area, the country’s financing-source redesign is already underway, with the domestic capital market playing a more prominent role.  “The financing of Brazilian infrastructure is already predominantly private.  Infrastructure debentures, created by Law 14.801/2024, have become the main way to raise capital in the domestic capital market,” he points out. The move broadens the range of alternatives available to concessionaires and Special Purpose Entities (SPEs) and reduces dependence on traditional financing sources.  Multilateral banks and the BNDES (Brazilian Development Bank) remain relevant, but now operate more integratedly within a diversified mix of capital.

This shift in funding sources also creates new opportunities for international investors. The changes introduced by the infrastructure debentures legislation have broadened the incentives for certain debt structures and may make operations in projects that the Brazilian government considers a priority, such as sanitation, clean energy, and transportation, more competitive. In this context, diversifying funding sources represents not only a change in the origin of resources, but also an evolution in the way projects are structured to access different types of capital.

However, increased liquidity does not eliminate structuring challenges. One key focus remains the guarantees required during the pre-operational phase, when projects are not yet generating revenue and carry the highest implementation risk. At this stage, creditors focus their demands on the quality of the contracts that underpin future cash-flow generation. Offtake agreements, engineering, procurement, and construction (EPC) contracts, and operation and maintenance (O&M) contracts must offer sufficient security to ensure the sustainability and bankability of cash flow. In Brazilian practice, however, guarantees still follow traditional patterns. “Bank guarantee letters remain the primary form of collateral, despite the high cost and the burden on investors’ credit limits,” warns Vianna.  According to the partner, growth in the capital market and development banks as funding sources has not been matched by equivalent innovation in guarantee structures, leaving limited-recourse project finance the general rule in the country’s infrastructure market.

However, some alternatives are beginning to emerge to reduce this dependence. Surety bonds aimed at protecting the financier in the pre-operational phase can function as partial substitutes for bank guarantees, while structured operations with multilateral organizations, such as the IDB, can count on partial guarantees from the Federal Government, reducing the spread charged to investors. The evolution of these instruments will be important for expanding projects’ risk-absorption capacity and bringing the Brazilian financing structure closer to more sophisticated project finance models.

This ability to distribute risks gains additional importance given the macroeconomic and political environment that will characterize the period up to 2027. In election years, exchange-rate fluctuations, interest rate futures, and perceptions of fiscal risk can affect the cost of capital and alter assumptions used to structure transactions. In this context, Vianna highlights a distinction that directly influences funds’ and concessionaires’ treasury decisions: the difference between risk and uncertainty. “In an election year, the market distinguishes between risk, which can be priced, and uncertainty, which cannot. The dollar rises as investors seek currency protection, interest rate futures price in a fiscal risk premium, and equities fall as investors demand a discount, but this specific uncertainty cannot be hedged directly, since there is no derivative for the political outcome itself,” explains the lawyer.

Part of this exposure can be managed through currency hedging instruments and other financial strategies. But for infrastructure projects, risk mitigation is not limited to market instruments. The legal structuring of long-term contracts can play a central role in preserving cash-flow predictability. Concessions and PPPs structured with robust contracts, regulated tariffs, and inflation-indexed mechanisms offer significant protection against certain macroeconomic fluctuations, contributing to debt-service stability and investor security.

The new infrastructure cycle, therefore, will not be defined solely by the amount of available capital or the number of projects in the pipeline. The ability to turn liquidity into investment will increasingly depend on a combination of diverse funding sources, appropriate guarantee structures, and contracts that distribute and mitigate risks throughout the project cycle. In an environment marked by regulatory transition and political volatility, the ability to build predictability can become a key differentiator for attracting private capital to Brazilian infrastructure.

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