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The Guide to Infrastructure and Energy Investment - Third Edition

How to Build Up a Region: Development Banks and Multilateral Financing

06 November 2018

Introduction: the 2016–2017 retrospect

Introduction

After a period of economic slowdown throughout the countries of Latin America and the Caribbean, the first half of 2018 saw the continuance of economic growth in the region, with GDP growth of 1.9 per cent in the first fiscal quarter and 2 per cent in the second quarter.2 However, there is a consensus among policymakers that significantly improving the region's infrastructure must remain a priority. Statistics demonstrate that infrastructure is at the core of economic development by increasing productivity, facilitating transportation, fostering mobility and generally enabling competitiveness. Moreover, infrastructure investment can also play an important role in countercyclical fiscal policy. Latin American countries spend on average 2.8 per cent of GDP on infrastructure, compared to 7.7 per cent in East Asia and Pacific or 6.9 per cent in the Middle East and North Africa.3 The quantity and quality of infrastructure in Latin America has vast room for improvement, with a yearly investment gap estimated to be between US$120 billion and US$150 billion a year.4

Historically, multilateral development banks (MDBs) have been a primary source of financing for infrastructure development efforts in Latin America. Undoubtedly, these institutions will continue to play a key role as finance engines for the region's development agenda. They are especially well suited to this task given their ability to manage risk, provide know-how, and fund the upfront and long-term costs of large-scale projects. However, the financial resources available to the traditional MDBs may not be sufficient to effect the much-needed improvements to the region's infrastructure.

The new landscape of financing institutions and activity by established actors

In 2015, some new institutions emerged that carved out a new space within the field of global development finance. These players are part of a broader movement of decentralisation in development finance and an increase in South-South cooperation. In particular, the recent multilateral development banks New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB) promise to be relevant players in Latin America in the future. Both institutions, together with the China-Brazil Cooperation Fund for the Expansion of Production Capacity (CBC), have a strong Chinese influence, thus abandoning the US leadership of most traditional MDBs. However, the traditional multilateral financial institutions continue to represent the bulk of investment in the region, a fact that is likely to remain true for the near future.

BRICS New Development Bank

In July 2015, the BRICS countries formed the NDB with the purpose of 'mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies', and to supplement the financing efforts of existing multilateral and regional institutions.5 With an annual estimated global infrastructure gap of about US$1 trillion, creating new financing opportunities for infrastructure projects is crucial for emerging and developing countries and the emergence of the NDB is a welcome addition to the development finance arena.6

BRICS collectively account for 53 per cent of the world's population and 23.1 per cent of its GDP.7 However, despite recent advances to give more weight to BRICS, their pace of economic growth has consistently outperformed BRICS' influence in long-established institutions.8 The NDB is meant to reflect a new geopolitical balance that is vastly different from the post-World War II setting during which many project finance institutions were created.

The subscribed capital of the NDB is US$50 billion, with each of the BRICS signatories contributing US$10 billion.9 This capital base will be used to finance projects within the BRICS countries initially, but other developing countries will also be able to seek NDB funding.10 During 2016, the NDB lent US$1.5 billion to 11 projects (only one in the region), and is expected to provide US$2.5 billion in loans in 2017. Originally all the NDB's funding was on a sovereign basis; it recently started to provide funding for non-sovereign project (a US$200 million loan to Petrobras for an environmental protection scheme) but it is expected to start lending to private borrowers in the near future.11

The NDB is a reflection of the ambition of its founders to assert their place in a new global financial structure. Its founding documents, however, specifically provide for cooperation with Bretton Woods institutions. The expansion of South-South cooperation constitutes a new layer of economic engagement that supplements the existing framework of project funding, rather than being opposed to it. Although many BRICS are coping with moderate to severe economic recessions, the NDB seems to be moving forward, creating a space for itself in Latin America.

AIIB

The second major initiative led by emerging economies is the AIIB. The Chinese government's proposal to create a new lending institution gained momentum in 2014, and the AIIB's articles of agreement entered into force in December 2015.12 There are 57 founding members, including many non-Asian countries such as Brazil, France, Germany and the United Kingdom.

The AIIB's stated goal is to 'complement and cooperate with the existing MDBs to jointly address the daunting infrastructure needs in Asia'.13 Nonetheless, there have been recent indications of investment interest in Latin America, signalling a shift from its original regional focus. Argentina, Brazil, Chile, Bolivia, Peru, Ecuador and Venezuela have all been approved as members of the AIIB, with Argentina expected to ratify at the end of 2018.14

CBC

On 10 May 2015, the Ministry of Planning, Development and Management of the Federative Republic of Brazil and the National Development and Reform Commission of the People's Republic of China entered into an agreement that aims to further the promotion of projects in Brazil and that emphasises China's interest in being an active player in the development of the region. Funded with an initial commitment of US$20 billion, the CBC will be focused on identifying projects considered as a priority by the Brazilian government and that improve industrial cooperation between the two countries. Priority sectors for investment include logistics and infrastructure, energy and mineral resources, advance technology, agriculture, agribusiness and agricultural warehousing, manufacturing, and digital services, among others.15

In May 2018, the Brazilian Ministry of Planning, Development and Management announced that the Brazilian and Chinese authorities have selected five projects – four in infrastructure and one industrial – to receive joint financing for a total amount of US$2.4 billion. These projects are currently being analysed to assess their financial viability.16

The common thread among the NDB, AIIB and CBC is undoubtedly China's interest in establishing its presence in the multilateral banking space. Despite its present stagnant economic growth, China has considerable national savings including approximately US$3.2 trillion in currency reserves, a significant portion of which is held in US government bonds.17 As the second-largest economy in the world, China appears intent on putting its economic prowess to use by collaborating with emerging and developing economies, and has taken a special interest in Latin America. This is further evidenced by China's commitment to financing projects in the region through its national policy banks (the China Development Bank and the China Ex-Im Bank), which surpassed World Bank and Inter-American Development Bank lending to Latin America in 2016.18 Infrastructure is a suitable asset for long-term investment, and improvements to the region's development will positively impact the deepening Sino-Latin American economic relationship.

Activity by established actors: instruments and reforms that afford new opportunity

Certainly, the NDB and AIIB will not displace the traditional financial institutions that promote the development of Latin American countries and have acknowledged that the best way to promote development is by partnering with these organisations and benefiting from their expertise, knowledge of the region and network to provide better financing options to the region.

These organisations have long focused on development in the region and have proven to be dependable sources of medium- and long-term funding for infrastructure, social development projects and climate change mitigation.

Local practitioners consistently identify the following institutions to be the most active in the region: the International Finance Corporation (IFC), with total commitments of US$5.3 billion in the region in 2017,19 the Inter-American Development Bank (IDB) and Inter-American Investment Corporation (IIC), with a combined US$2.9 billion commitment in 2017 (with an additional US$7.9 billion on sovereign guaranteed loan investment projects and US$3.4 billion on policy-based loans),20 the Latin American Export Bank to Foreign Trade Bank of Latin America (more commonly known as Bladex) and the Development Bank of Latin America (CAF), with a total of US$12.3 billion in commitments in 2017.21

On another hand, the new MDBs have also been very active in the region. The NDB more than doubled its portfolio, approving US$1.85 billion in funding commitments on new projects (although no new projects have been approved in Latin America), and is expected to approve loans for a total amount of US$4 billion in 201822 while the AIIB is considering its first investments in the region.

One of the steps that the new players have taken to benefit from the traditional MDBs is establishing the ground rules under which they can work together. The NDB has signed memoranda of understandings with the CAF23 and the World Bank Group,24 and the AIIB has also entered into a memorandum of understanding with the IDB and IIC to promote cooperation between these institutions, knowledge exchange and the co-financing of infrastructure projects,25 specially those related to sustainable infrastructure, energy, water and sanitation, and the environment. The AIIB also signed collaboration agreements with the IFC, World Bank Group, AfDB, EBRD, EIB and NDB to encourage private-sector investment in infrastructure.26

Latin American countries are frequently among those with the highest MDB exposure, in particular with respect to the World Bank Group institutions including the IFC. Moreover, the IDB continues to be the main source of regional multilateral financing in Latin America. These organisations have developed programmes and have modified their operations in ways that may present new opportunities for countries in Latin America and the Caribbean. The Global Toolbox27 compiles a list of more than 50 instruments that are available from MDBs to support private investment in Latin America. Some of these initiatives are discussed in detail below.

The IFC's MCPP programme and the new MCPP Infra

The Managed Co-Lending Portfolio Program (MCPP) is a platform that the IFC launched to create diversified portfolios of emerging market loans, allowing investors to increase exposure – or get first-time entry – to this asset class. Through mobilisation, the MCPP gives the IFC the ability to provide larger financial options than it could provide on its own account and increases the financing available for achieving its development goals.28

The initial MCPP programme was launched in 2013 with a partnership with the State Administration for Foreign Exchange (SAFE) of the People's Bank of China, which pledged US$3 billion under the MCPP platform to be committed over a six-year period.29 The MCPP allocated the US$3 billion across 70 deals in less than two years and it demonstrated how large investors can benefit from delegating the processes of deal origination and approvals to the IFC.30

Following the success of the original MCPP programme, in 2016 the IFC launched MCPP Infra, a US$1.6 billion programme specifically developed with leading insurance companies and other development partners, including the Swedish International Development Cooperation Agency (SIDA). The MCPP platform will create a diversified portfolio that mimics the IFC's own future portfolio of infrastructure investments31 and aims to significantly scale up the IFC's debt mobilisation to invest in emerging market infrastructure.

The MCPP Infra programme will (1) enable institutional investors to leverage the IFC's ability to originate a manage a portfolio of bankable infrastructure projects; (2) offer institutional investors a portfolio that has sufficient scale and diversification; and (3) provide credit enhancement to the portfolio by providing a first lost tranche covered by the IFC and the SIDA.32

The MCPP investors sign upfront administration agreements setting eligibility criteria and concentration limits. IFC then identifies eligible deals following such criteria and commits the investor's exposure alongside its own investment on the same terms and conditions. In this structure, the MCPP investors participate in a senior tranche while the IFC (with the support of the SIDA) invests in a junior tranche in the investing vehicle that takes the first loss to provide for the credit enhancement.33

The successful implementation of the MCPP Infrastructure model will provide developmental benefits directly through financing critical infrastructure projects in emerging markets and low-income countries at much lower transaction costs and it will be extremely valuable from a development standpoint, in view of the overwhelming financing requirements for developing sustainable infrastructure on a global basis.

IFC's Green Bonds programme and the China-Mexico Fund

In developed markets, bonds have traditionally been an attractive way to obtain cheap and long-term financing for infrastructure investment. Unfortunately, the private sector in developing countries has suffered from tremendous difficulties accessing local debt markets owing to the lack of comfort that international investors have had in these markets. Moreover, climate change is one of the biggest obstacles to development, potentially increasing the incidence of natural disasters and affecting water, energy and foods supplies, which will especially affect the development of the poorest countries.34

Financing developing countries' shift to a greener path of growth can often be a challenge.35 The IFC has extensive experience in this field and in order to tackle this deficiency, in 2010 the IFC launched the Green Bond programme. This programme is part of its mandate to address climate change and to help develop the market and unlock investment for private-sector projects that support renewable energy and energy efficiency.36 As of September 2016, US$5.8 billion in green bonds has been issued under this programme with 64 transactions in 12 currencies.37

The global market for green bonds is over US$100 billion, but few local banks in developing countries have issued such bonds. Traditionally, the IFC would act as the issuer of green bonds in local markets, benefiting from its AAA rating to raise money in local currency at a low cost, but in 2016 the IFC decided to take a new approach by playing a leading and supporting role in the structuring and issuance of green bond issuances by local banks. The IFC's support aims to encourage more local financial institutions to issue green bonds relying on the IFC's expertise and experience. The final goal of the programme is to develop guidelines and procedures to build a green bond market in these countries and to increase global demand by attracting international investors.38 Green bond investors are attracted to the IFC's Green Bond programme because of the IFC's impact reporting and the availability of a third-party second opinion on the programme's environmental standards.39

As of July 2017, the IFC has supported two green bond issuances in Colombia, for a combined amount of 750 billion Colombian pesos, in which the IFC acted as lead investor. In addition, the IFC has partnered with Amundi, a leading European asset manager, to create the largest green bond fund dedicated to emerging markets, consisting of a US$2 billion fund that aims to deepen local capital markets and expand financing for climate investments.40 The IFC's goal for this initiative is to catalyse US$13 billion in private-sector capital annually by 2020 to climate-friendly projects.41

In addition to the Green Bond programme, in 2016, the IFC together with Chinese and Mexican investors launched the China-Mexico Fund (CMF), a US$1.2 billion fund managed by the IFC's asset management company, with the goal of supporting the structural reforms needed in Mexico through venture capital investment. The CMF is focused on energy, natural resources and infrastructure projects, having already committed over US$320 million to two projects: Citla Energy and Red Compartida. Citla's goal is to expand its oil exploration and production in Mexico through its participation in bids and the acquisition of and partnerships with other operators,42 whereas Red Compartida, one of the largest telecommunication projects in the history of Mexico, will allow over 90 per cent of the country's population to have access to some of the best communications technology available worldwide.43

IIC restructuring: a new streamlined process for private-sector interaction with the IDB

In January 2016, the IDB Group consolidated its private-sector operations in the IIC with the goal of maximising the development impact of private-sector activities, increasing efficiency and improving coordination with public-sector projects.44 The unified IIC offers the full array of private-sector products and services previously offered across four separate IDB Group entities. The IIC's focus will remain on lending, equity investments and advisory services to SMEs from an integrated perspective that will offer faster processing times and a single point of access to the products available to the private sector through this institution.

As the largest regional development bank and a main source of development finance in Latin America and the Caribbean, the restructuring of IDB institutions is significant for the region. The IIC benefits from a US$2.03 billion increase in the institution's capital stock, US$1.3 billion of which consists of new contributions by member countries payable over seven years with the remainder to be transferred from the IDB starting in 2018.45 The IIC expects that through this capital increase, it will be able to mobilise more resources, aiming to finance US$34 billion worth of projects in Latin American in the next 10 years, with an expectation that twice that amount of funding will come from the organisation's strategic partners.46

Some of the newly adopted goals of the consolidated operations may present areas of opportunity for private investment in Latin America. First, the IDB and IIC have endorsed the objective of increasing the volume of climate-related financing to 30 per cent of the IDB's and IIC's combined operational approvals by the end of 2020.47 With this policy, these entities seek to address the climate investment needs in the Latin American and Caribbean region, which have been estimated at US$75 to US$80 billion per year between 2020 and 2030.48 This may instil motivation in countries seeking to implement an agenda that addresses climate mitigation concerns by means of private-sector investment.

Secondly, the IIC also plans to implement modifications of the manner in which it interacts with SMEs in the region by increasing interaction with local financial institutions, such as by backing more debt issuances or co-financing equity purchases of SMEs with banks. This effort is of particular importance as SMEs account for nearly 90 per cent of all businesses in Latin America, and there is a growing need for financing products and services to tend to these businesses. According to the IIC, the financing gap for those SMEs is between US$210 and US$250 billion.49 A recent IIC survey also showed that 44 per cent of banks in Latin America acknowledge that their financial products are inadequate to serve the SME market, an issue that the International Chamber of Commerce also aims to address.50

The expanded IIC goal promises to offer highly specialised financial solutions as well as non-financial and knowledge products to continue development efforts through the growing private sector in the region.

Sector and country trends51

Below is a summary of relevant trends in some of the countries in Latin America, with a brief, non-exhaustive discussion of some of the most active countries in the region.

Renewable energy projects

Multilateral organisations continue to be active in the renewable energy sector in Latin America. It is estimated that Latin America will need almost twice its current power capacity by 2030 to meet the region's demand.52 For example, in 2015, the IIC approved four renewable energy projects totalling an investment of US$27.89 million in the region.53 It also entered a new sector by funding its first solar-power transaction in Panama with a US$11.9 million loan.54 In 2016, the movement toward green investment has continued, with the bank approving loans for four solar farms located in Uruguay, Chile and El Salvador and funding one Uruguayan wind farm.55 Certainly, projects of this magnitude could not be achieved without the substantial backing of MDBs.

Argentina

In Argentina, the administration of President Macri has pledged to prioritise infrastructure and renewable energy spending as part of the overall economic policy changes recently implemented.56 Local practitioners Ivana Grossi and Pablo Torretta from Estudio Beccar Varela have noted that there is a good disposition by the government to ensure legal protection of foreign investors in the country. In this sense the existing foreign exchange restrictions have been abrogated, facilitating the performance of foreign investments in Argentina. Macri promised to launch 'the most important infrastructure programme in [Argentina's] history – ports, energy, trains, waterways'.57 Energy self-sufficiency was an additional government goal. The government launched the RenovAr programme, targeting to produce 20 per cent of its electricity from renewable sources by 2025 and to attract about US$35 billion in investments.58 Up to the date, 157 projects have been awarded through this programme, mainly related to wind and solar projects.

Moreover, in November 2017 the Argentine Congress passed a bill revamping the country's public–private partnership (PPP) framework. As of September 2018, six contracts related to public railways projects have been executed under this initiative, and the bidding for electric transmission lines and public transportation projects is expected to start soon. This new scheme is perceived as an opportunity to help address the country's existing infrastructure deficit and to attract banks and multilateral lending agencies to provide funding for public works.59 In this sense, the CAF has granted Argentina a loan equivalent to US$100 million to support the development of PPP projects.60

The CAF has been active and is expected to continue to be active across the various sectors described above. It has also granted loans to Argentine provinces for the development of different infrastructure projects, including a loan granted to Buenos Aires province for the Lujan's river basin capacity expansion of US$120 million.61

Additionally, the IFC helped to organise the renewable-energy auction, including setting up the process to attract international bidders62 and has also tripled its investment in the country following President Macri's economic reforms.63

Furthermore, the IFC, IDB and CAF have been active granting financing to private companies in Argentina. The IDB, along with the IIC and FMO have recently financed the construction of an 80MW solar plant in the province of San Juan, and the IDB is currently analysing the financing of the Arauco Wind Project II (two wind farms of a combined installed capacity of 194.75MW), including a 83km, 132kV high-voltage transmission line. The project will sell electricity to CAMMESA under two 20-year power purchase agreements (PPAs) awarded under the RenovAr programme, mentioned above. The financing will partially be funded through mobilisation.64

On another note, IDB Invest has approved a programme for promoting risk mitigation instruments and finance for renewable energy and energy efficiency investments for medium-sized enterprises (SMEs) in Argentina with the BICE. The objective of this technical cooperation is to support the execution of a global credit line programme that improves efficiency in the production and use of energy in Argentina by increasing the investments of SMEs in renewable energy and energy efficiency to reduce greenhouse gas emissions.65

Central America

In Central America, the increasingly competitive cost of energy generated from renewable sources, coupled with growing energy demand in countries with strong economic growth makes a compelling case for the adoption of renewable energy. More than 50 per cent of Central American energy production is now based upon renewable energy sources and in Costa Rica 98 per cent of total energy consumption is produced from clean sources. According to the Costa Rican Institute of Electricity (ICE), in 2017, the nation of 5 million people ran on electricity generated by renewable energy sources for over 300 days. Central America's potential to develop various types of renewable energy is significant and recent capacity increases in El Salvador, Costa Rica and Panama point to a bright future for wind and solar adoption in the region, as described recently by the International Renewable Energy Agency (IRENA). In El Salvador, the IIC and IADB, along with other lenders, have agreed to a prospective long-term loan financing to be provided to a subsidiary of the French company Neoen for the purposes of developing, constructing, operating and maintaining a 164MW solar power plant. This constitutes the second financing granted to Neoen for a solar power plant in El Salvador. In Panama, the IFC financed part of the construction and operation of Panama and Central America's first integrated liquefied natural gas (LNG) to power facility.

The recently inaugurated Costa Norte facility and power plant at Colon, is expected to be a launchpad for LNG trade across Central America. Many utilities in Central America remain reliant on burning oil to generate electricity, but LNG offers a cleaner, cheaper and more efficient alternative. Zygmunt Brett, from Arias, maintains that the region continues to work on finding ways to make their economies more attractive for investments. PPP structures have become commonplace and should be expected to continue to figure prominently as financing alternatives for banking institutions in the region. Countries such as El Salvador, Guatemala and Nicaragua are investing resources to promote the use of PPPs and stimulate private participation in public services. Sectors such as energy, infrastructure, public building, ports and airports are expected to remain active for the foreseeable future.

Mexico

In Mexico, the emphasis on renewable energy continues. Oil and gas upstream and midstream projects and other conventional-power-related projects, however, continue to be of interest. An important issue is the new context that Mexico is facing associated with recently elected President Andrés Manual López Obrador. President Obrador has a very different economic view from the previous government, and while it is not expected that he will move in a completely different direction, changes are expected in the energy and infrastructure sector. In the energy sector, President Obrador has mentioned that he will strengthen the national oil and power companies (Pemex and CFE) and will also support the construction of large refineries. However, it is yet to be seen how these actions will be implemented. There is also continued interest in other sectors, such as transportation and agricultural projects. With regards to transportation, President Obrador will support the construction of a train seeking to connect the Yucatan Peninsula, although the plan may face financial and environmental constraints.

Miguel Ángel Mateo, from Hogan Lovells, identified the long-term electric energy, power and clean energy certificate auctions organised by the government as an area that has drawn attention from MDBs and private institutions. On March 2018, the Mexican government launched the fourth auction for the sale of power, electric energy and clean energy certificates under a long-term PPA framework. This new auction continued to use the 'energy clearance house', managed by CENACE (the Mexican electricity market operator), that allows more than one load-serving entity (buyer) to participate in the auction and to submit purchase offers for power, electric energy and clean energy certificates from power generators. Furthermore, an auction for the award of medium-term PPAs (for energy and power) was launched in August 2017.

Also, in February 2018, two large transmission projects were launched by the Mexican government. The first one was launched by the Ministry of Energy, and its purpose is to award an operation contract for a HVDC transmission line seeking to connect the isolated grid of Baja California with the National Interconnected Grid. The contract is a design-build-operate-transfer (DBOT) structure. While the project has major international transmission developers interested, lenders (MDB and private banks) have expressed concerns as to the bankability of the project. The award is supposed to be issued later this year. At the same time, CFE Transmisión (the transmission system operator owned by the Mexican government) has launched a similar process to connect a zone in southern Mexico where production of renewable intermittent energy is high, to the centre of Mexico through a HVDC transmission line. This is also a DBOT structure. The projects are materially different in their contractual and economic structure; the CFE project has generated more interest from similar players and lenders, considering the contractual structure of the same.

The World Bank Group, Bladex, IDB and, to a lesser extent, the European Investment Bank are active organisations in the country and will likely continue to be key multilateral investors in the foreseeable future. Although PPP regulations have been enacted in Mexico, these laws were only recently put into effect and need further elaboration and structuring. Nonetheless, these regimes have been used to develop small-scale projects such as schools and hospitals. Practitioners expect these frameworks to become a common vehicle for the development of roads, wastewater treatment and hydroelectric projects in Mexico.

Colombia

In Colombia, discussions surrounding the 4G road projects continue to dominate the arena. These projects have been facilitated through a PPP structure with participation by the federal government in conjunction with local, international and multilateral banks. Although the uncertainty of the liquidation process of the Ruta del Sol 2 project after it was declared null by the local courts has caused many financial institutions to be concerned about their protections following corruption-based court proceedings, these 4G road projects, along with other major infrastructure projects in the country, continue to move forward and are backed by MDBs and private financial institutions.

The Colombian parliament is currently in the process of drafting new legislation that will regulate the liquidation process of PPPs, with the goal of increasing foreign and local investments by eliminating the uncertainty of creditors' remedies after a concession is declared null.

In addition, investors and developers are now turning their attention to the projects that may follow from the implementation of a peace deal that would dismantle the Revolutionary Armed Forces of Colombia – People's Army rebel group after 52 years of war. A new pact includes provisions for modernising Colombia's poor countryside by improving its infrastructure and building low-cost housing projects. Projects such as these will surely require multilateral participation in the form of funding and expertise. In the past, the IFC and CAF have collaborated to provide funding to Financiera de Desarrollo Nacional, which is the public agency charged with promoting infrastructure financing.

Brazil

For Brazil, the political turmoil, anti-corruption and money laundering investigations, and economic recession of recent years have negatively affected investments in the country. However, since President Michel Temer took office in August 2016, the country is again trying to attract foreign investment. Legal developments in labour law, tax debt ceilings and corporate governance of state-owned enterprises together with the structural changes expected, including a tax reform, after Brazil's application to become a member of the OECD, are all moves in the right direction.

Pedro Aguiar de Freitas, from Veirano Advogados, commented that Brazil desperately needs to recover and improve its infrastructure. There were major changes made to the Labour Law to allow more flexibility in line with a new economy based on services and consolidation and reform in major unions. There has been a substantial amount of Chinese, European and Canadian investments, mainly in the oil sector following the successful tenders of oil fields. Pedro also commented that they expect further changes in the infrastructure and tax law to solve past mistakes and become more attractive to new investors, mainly in the natural resources, logistics, telecoms, water, electricity, gas and renewables sectors.

Traditionally, the projects financed by multilaterals in Brazil are mostly in the infrastructure sectors that contribute to sustainable development, such as: renewable energy, transportation and sanitation. This activity and sector focus is expected to continue, especially after the recent incorporation of the CBC.

Conclusion

In addition to the new MDB entrants, multilateral development banks will continue to fulfil an important role in the development efforts of Latin American and Caribbean countries. The efforts of institutions such as the World Bank Group, CAF and IDB, not just in providing financing resources, but also in mitigating risk, attracting private investment, establishing policy frameworks and bringing in skills and information, will continue to be a driving force of the development agenda of this region.


Footnotes

1 Thomas Hechl is of counsel and Antonio de la Esperanza is a foreign associate at Hogan Lovells.

5 Sixth BRICS Summit – Fortaleza Declaration, available at www.mea.gov.in/bilateral-documents.htm?dtl/23635/Sixth+BRICS+Summit++Fortaleza+Declaration.

6 Global Infrastructure Facility, available at www.worldbank.org/en/programs/global-Infrastructure-facility.

9 See Sixth BRICS Summit – Fortaleza Declaration at footnote 6.

13 Idem.

36 Idem.

39 Idem.

45 Idem.

48 Idem.

51 We are grateful for the contributions of the practitioners who provided insightful observations about multilateral activity in the region. We extend our gratitude to Ivana Grossi and Pablo Torreta, Estudio Beccar Varela; Pedro Aguiar de Freitas, Veirano Advogados; Mayuca C Salazar, Miguel Ángel Mateo, Bruno Ciuffetelli, Hogan Lovells; Carlos Vouga and Rodolfo G Vouga, Vouga Abogados; Luis R Pellerano and Joanna M Bonnelly, Pellerano & Herrera; Zygmunt Brett, Arias & Muñoz; Carlos Pinto, Ferrere; David Gutierrez and Julio Castellanos, BLP; and Silvia Otero, Posse Herrera Ruiz.

53 Idem.

54 Idem.

57 Idem.

61 Idem.

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