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Tax-exempt infrastructure bond issuance rises 56%

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Tax-exempt infrastructure bond issuance reached a record volume of R$33.8 billion last year, up 56% from 2018. The figure is included in the Incentivized Debentures Newsletter, prepared by the Economic Policy Secretariat (SPE) of the Ministry of Economy. Valor had exclusive access to the document.

As a result, the volume issued since 2012, when the bonds were created, reached R$83.9 billion by the end of last year. The amount reaches R$92.2 billion when considering a broader set with tax-exempt bonds in general, up 41% from 2018.

"There was a large number of issues and the ticket for each issue increased," said the Economy Ministry's general coordinator of Microeconomic Reforms, César Frade, who pointed out these factors as signs of maturity in the market. There were 98 issues in 2019, compared with 76 in 2018. The average amount reached R$350 million.

Moreover, the average term of the securities rose to 13.3 years in 2019 from 9.6 years in 2018. The movement, Mr. Frade estimates, was supported by the improving macroeconomic environment. Last year, even 25-year bonds were issued, the longest ever recorded by the government. Transmissora Aliança de Energia Elétrica S.A. (Taesa) was the issuer.

Despite the growth, the volume is still insufficient in the face of infrastructure investment needs in Brazil, underscored the undersecretary for Microeconomic Policy and Infrastructure Financing, Pedro Calhman de Miranda. A McKinsey study indicates that Brazil would need to invest R$300 billion a year for two decades to match its infrastructure to that of its leading global competitors.

"We have an ongoing agenda for developing mechanisms to finance infrastructure, both for the domestic market and for attracting foreign markets," the undersecretary said.

For this year, the government's priority for tax-exempt debentures is to develop the secondary market. The objective is to reduce volatility for investors in infrastructure bonds, Mr. Calhmann said.

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