Brazil is poised to revolutionize sustainable investment with a groundbreaking initiative set to unlock up to $20 billion in foreign investment for eco-friendly projects. Treasury Secretary Rogerio Ceron revealed that Brazil will present its credit lines with long-term currency hedges to global investors, creating a blended finance line that combines private and public-sector capital.
At the G20 finance meetings in Sao Paulo, bankers and policymakers hailed Brazil’s new hedging program as a potential game-changer for financing climate change solutions in emerging markets. Ceron expressed optimism about the program’s impact, stating, “For every $1 billion I invest in the program, I can leverage between $5 to $10 billion.” The Treasury plans to kickstart the program with $1 to $2 billion, with a potential to reach $20 billion in fundraising under the best-case scenario.
The success of the program hinges on banks offering the blended finance line to investors in conjunction with funding through foreign capital markets. The initiative also includes a contingent liquidity line, providing cash for sustainable development projects during currency devaluation, a credit line for banks to develop currency hedging products, and a line for structuring projects aimed at ecological transformation.
The Treasury is preparing roadshows to present the full array of measures, which are expected to be ready for the market in a couple of months pending an executive order from President Luiz Inacio Lula da Silva. Ceron expressed confidence in the program’s long-term impact on foreign direct investment (FDI) in Brazil, predicting a positive change by the end of Lula’s term. He stated, “I am completely confident that we will create a program that will be a legacy for the country. In three years, we will look back and say it made a difference.”
The Inter-American Development Bank (IDB) has already contracted $3.4 billion in derivatives, which will be offered via Brazil’s central bank, further bolstering the program’s potential success. IDB President Ilan Goldfajn lauded the initiative, suggesting that it could serve as a benchmark for similar initiatives in other countries.
Brazil’s new sustainable finance program represents a bold step towards attracting foreign investment for eco-friendly projects and could set a new standard for financing climate change solutions worldwide.
(Source: Reuters)
