Brazil’s Development Bank to Buy Bonds to Fund Infrastructure

Brazil’s national development bank will start buying local infrastructure bonds from companies next year as the government steps up efforts to improve the transport system, said Luciano Coutinho, head of the bank.

Brazilian companies may sell as much as 50 billion reais ($24.7 billion) in such tax-exempt bonds next year, Coutinho told reporters in Brasilia. The Rio de Janeiro-based BNDES may fund as much as two-thirds of all the planned investment in roads, railways, ports, and airports, he said.

Brazil wants to renovate its aging infrastructure to reduce transportation costs and prepare for hosting the 2014 World Cup and the 2016 summer Olympic Games. President Dilma Rousseff announced in August the government would sell licenses to build and operate roads and railways, with investment expected to reach 133 billion reais, and will do the same for airports and ports. The government grants tax breaks for investors who buy bonds sold to fund infrastructure projects.

“Treasury bonds now offer lower returns and both investment funds and pension funds need higher investment goals,” Coutinho said. “Nothing is better than infrastructure investment that can offer long-term returns with relatively low risk.”

To contact the reporters on this story: David Biller in Boston at dbiller1@bloomberg.net; Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net