This document discusses Brazil's national Logistics Investment Program (PIL) which aims to strengthen the Brazilian economy through private sector investment in infrastructure projects including roads, railroads, ports and airports. The program will deploy $65 billion across 20 states and 130 municipalities. It is expected to lower transportation costs and connect agricultural regions to global markets, benefiting various economic sectors. Private capital and financing from development banks will play a key role in funding the ambitious initiative.

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THE WALL STREET JOURNAL. Monday, June 29, 2015 | C4A
At a t i m e w h e n g l o b a l b u s i n e s s i s
confronted with persistent economic
uncertainty and relatively high monetary liquidity,
Brazilstandsoutasaveryattractivedestinationfor
globalinvestors.AccordingtotheUnitedNationsConference
on Trade and Development, Brazil has been among the six
largest recipients of foreign direct investment since 2011, and
the second largest recipient from the developing world, just
behind China.
In just the past two years
alone, foreign direct investment
reached a record US$132 bil-
lion. Among the main targets
of foreign investment in Brazil
is infrastructure. This is because
most segments of infrastruc-
ture have major participation of
national and international pri-
vate investors. Energy, telecom,
water and sanitation, as well as
logistics, have increasingly attracted
private investment.
Indeed Brazil accounted for
41 percent of infrastructure
investment contracted with private
participation in developing countries
in 2014 (World Bank, PPI) and is the
home of several dozen international
operators of infrastructure.
The recent launch of the new round of the national Logistics
Investment Program (PIL) offers new venues for this investment.
The program aims at strengthening the competitiveness of the
Brazilian economy by offering many roads, railroads, ports and
airports to be built, expanded and operated by the private sector.
“This program is a superb gate to a better future,” said
Dilma Rousseff, President of the Republic of Brazil, during the
announcement of this new round of concessions.
This program creates opportunities for investing in new and
upgraded infrastructure in the five regions of the country. It means
deploying US$65 billion in 20 Brazilian states and 130 Brazilian
municipalities.
The program will help bring
agricultural products to world markets
at a much lower cost by connecting
the central region of Brazil to enhanced
ports in the South Atlantic as well as
near the equator. This will shorten the
time it takes to reach markets in Europe,
the U.S. and Asia significantly. Several
roads will serve manufacturing clusters,
especially in the South region.
Investments in airports will help the
Brazilian infrastructure keep up with
the growth in travel and air cargo
observed in recent years, increasing
the connectivity of hundreds of
Brazilian cities to all regions in the
country, in the Western Hemisphere
and in the world.
“Like all great programs of
investments in logistics,” Rousseff
said, “its effects will be multiplied throughout the
production chain, in all areas of the economy, from
agriculture, to industry, to the service sector and,
above all, will contribute to enhance the quality of life
of the people.”
Domestic and international capital markets will
play a crucial role in helping finance this ambitious
investment program. For this purpose, the government
is developing new financial instruments, working
alongside Brazilian and international financial institutions, the
World Bank and partner countries in the G20.
It is also strengthening regulatory framework that has been suc-
cessfully developed in the country in the last 25 years. New guar-
antee mechanisms to private investors are also being designed to
provide further comfort to those investing in these long-term op-
portunities of income streams associated with real assets in one
of the largest, most diversified and stable economies in the world.
Indeed, a strong coordination and partnership between the
public and private sectors is already a hallmark of this initiative,
furthering its ability to leverage the growth of many economic
sectors in Brazil.
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INVESTMENT
OPPORTUNITIES
IN BRAZILIAN
INFRASTRUCTURE
WITH RENEWED FOCUS ON PRIVATE SECTOR
PARTICIPATION, THE COUNTRY IS NOW
PRIMED FOR NEW INVESTMENT
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Special Advertising SectionSpecial Advertising Feature Special Advertising Feature
As the fifth-largest country in the world, it’s
not surprising that Brazil has one of the world’s
largest road networks, with more than 1 million
miles of roadways.
At present, though, less than 15 percent of the
national road network is paved, meaning that road
surfacing and maintenance services are crucial to
help connect more parts of the country and im-
prove transportation efficiency.
Approximately 60 percent of total freight and
45 percent of passenger transportation in Brazil is
carried over the national highway network, which
is a relatively high percentage compared to other
similar-sized countries (in square miles) — such as
Australia, Canada and the United States — where
railroads play a much bigger role in transporta-
tion. This creates a much larger demand in Brazil
for quality highways with updated infrastructure.
The investment in Brazil’s highways is esti-
mated at US$21.3 billion, covering some 4,300
miles of toll roads. A total of 11 new contracts for
toll roads will occur in 2016, while four auctions of
toll road concessions are expected for 2015.
The highway concession program has three
main goals: to create a wide, modern and integrat-
ed road network; to supply efficient and competi-
tive supply chains; and to lower toll rates. It is also
expected that there will be the creation of addi-
tional lanes and roadway expansions in roads that
are already under concession.
Four toll road projects began in 2014, includ-
ing the auction of the Rio-Niterói Bridge project in
which six companies participated in a competition
and the winner presented a proposal with a dis-
count of 36 percent. The new contract reduced the
toll by US$0.48.
The results of these concession contracts will
see substantial upgrades to highways, including
additional lanes, bypasses, pedestrian crossings,
side roads, overpasses and bridges.
The Brazilian National Development Bank
(BNDES)willbeabletofinanceupto70percentof
the investment, and the program considers high
incentives to the participation of other banks and
capital markets in the financing structure.
NEWTOLLROADSBRINGEFFICIENCY,
COMPETITIVESUPPLYCHAIN,BETTERSERVICE
Privatized in the 1990s, Brazil’s railway
network has suffered from a lack of investment
for many years.
Originally, the railroads were built to con-
nect coffee-growing areas to the ports during the
19th century. But then roads became the pre-
ferred form of transportation.
There are 17,400 miles of railway under
private management in Brazil and five railway
auctions are scheduled to take place in the near
future, adding over 4,682 new miles of track.
Today, the bulk of rail transport accounts
for just 25 percent of the freight transportation
in Brazil — a low share compared to similar-
sized countries.
Brazil’s railway network mainly transports
iron ore (over 70 percent of total rail freight), soy-
beans, corn, steel and other minerals.
From 2001 to 2014, the growth of Brazilian
grain production reached an average 6.2 percent
per year; more than 80 percent of the volume of
soybeans is transported by trucks.
Upcoming auctions:
• Two stretches (totaling 888 miles) over
the North-South Line (FNS): the first from
Barcarena (state of Pará) to Açailândia (state
of Maranhão); the second from Palmas (state
of Tocantins) to Anápolis (state of Goiás)
• Two stretches (totaling 556 miles) over
the North-South Line (FNS): the first from
Anápolis (state of Goiás) to Estrela D’Oeste
(state of São Paulo); the second from Estrela
D’Oeste to Três Lagoas (state of Mato Grosso
do Sul)
• 708 miles from Lucas do Rio Verde (state of
Mato Grosso) to Miritituba (state of Pará)
• 355 miles from Rio de Janeiro (state of Rio de
Janeiro) to Vitória (state of Espírito Santo)
• 2,175 miles over the Brazilian side of the
Bioceanic Railway
Ports are essential to Brazil’s business infra-
structure, responsible for handling 90 percent of
international trade, including imports and exports.
In June 2013, a new Ports Law came into effect. This
law — described as the most fundamental change
to the port sector since Brazil’s ports opened to
“friendly nations” in 1808 — opens the port sector
to greater competition, attracting new investment.
At the heart of the new Ports Law is the goal of
making Brazil more competitive in both domestic
and international markets by increasing port effi-
ciency — to reduce costs, attract new investment,
increase port handling capacity and absorb grow-
ing demand. The new law also provides for a shake-
up of the institutional structure governing the ports
sector in order to streamline decision-making.
The expected investments from the new pro-
gramareestimatedtobemorethanUS$12.11billion
over the next five years. The purpose of expanding
Brazil’s ports is to widen and modernize port infra-
structure through strategic partnerships with the
private sector, synergizing transportation between
roads, rail networks, waterways and airports.
The ports program is operated to end entry bar-
riers; launch a port lease program; end restrictions
to private terminals; and increase ship volume at
the lowest price. Of the US$12.11 billion allocated
for ports, approximately 30 percent will go to ex-
isting concession renewals. New terminals in the
ports of Santos and Pará state, totaling US$1.5 bil-
lion, are expected to be auctioned this year.
By selecting criteria for awarding contracts,
Brazil hopes to focus on greater cargo volume with
the lowest tariffs — and possibly the highest bid.
Concessions will be granted for up to 25 years, re-
newable for the same length of time on the granting
authority’s approval. Existing contracts will remain
in force until they expire and will be put up for ten-
der at least 12 months prior to the deadline.
Simplification of concession procedures, in-
cluding tender by auction with inverted phases,
involves focusing first on cost control and second
on technical qualifications. Authorization for pri-
vate port terminals to handle any type of cargo is a
key change, as private port terminals could previ-
ously handle only their own freight. A greater scope
for public consultations will be allowed in order to
determine whether to authorize total or partial in-
vestment in submitted projects.
INVESTORS CAN NOW PARTICIPATE IN
NEW RAILROAD CONCESSION PROJECTS
STRATEGIC PARTNERSHIPS WITH PRIVATE
SECTOR WIDEN PORT OPPORTUNITIES
AIR TRAVEL SERVICES STREAMLINED
TO BOOST TOURISM
HIGHWAYS
13
14
15
4
3
6
7
2
1 10
11
12
8
9
5
CALDAS NOVAS
ARARAS
CAMPINAS (AMARAIS)
JUNDIAÍ
FLORIANÓPOLIS
BRAGANÇA
PAULISTA
SALVADOR
FORTALEZA
NATAL
(SÃO GONÇALO DO AMARANTE)
UBATUBA
RIO DE JANEIRO (GALEÃO)
ITANHAÉM
BELO HORIZONTE
(CONFINS)
PORTO ALEGRE
PROJECTS UNDER WAY
RAILWAYS PORTS AIRPORTS
AIRPORTS
Issuingatleast15%ininfrastructurebondsincreaseslong-terminterestratefinancingsharefrom15%to30%.
NO
BONDS
15%
30%
55%
AT LEAST
15%
BONDS
30%30%
25%
15%
AT MOST
35%
BONDS
35%
30%
35%
HIGHWAYS
Issuing at least 10% in infrastructure bonds increases long-term interest rate financing share from 35% to 45%.
BNDES LONG-TERM INTEREST RATE + 1.5% PER YEAR + CREDIT RISK BNDES OTHER SOURCES + 1.5% PER YEAR + CREDIT RISK INFRASTRUCTURE BONDS EQUITY + CASH FLOWHOW THE BRAZILIAN DEVELOPMENT BANK (BNDES) FINANCES INFRASTRUCTURE
NO
BONDS
35%35%
30%
AT LEAST
10%
BONDS
15%
30%
10%
45% AT MOST
25%
BONDS
45%
30%
25%
NO
BONDS
70%
20%
10%
20%
BONDS
70%
20%
10%
PORTS
Issuing at least 10% in infrastructure bonds increases long-term interest rate financing share from 25% to 35%.
NO
BONDS
25%
30%
45%
AT LEAST
10%
BONDS
35%
25%
10%
30%
AT MOST
35%
BONDS
35%
35%
30%
NITERÓI
RIO DE JANEIRO
ITAGUAÍ
MANAUS MACAPÁ
ITAQUI
FORTALEZA
CABEDELO
NATAL
RECIFE
SUAPE
MACEIÓ
SALVADOR
ARATU
VITÓRIA
SÃO SEBASTIÃO
PARANAGUÁ
SANTOS
SÃO FRANCISCO
DO SUL
ITAJAÍ
IMBITUBA
PORTO ALEGRE
RIO GRANDE
SANTARÉM
BELÉM
VILA DO CONDE
PORTS
US$21.3 billionESTIMATED INVESTMENT
TOLL
ROADS
4,350 MILES
OF NEW TOLL ROADS
TO BE AWARDED
BRAZIL HAS ONE OF THE
WORLD’S LARGEST ROAD
NETWORKS, WITH
1,056,331
MILES OF
ROADS
US$27.9 billionESTIMATED INVESTMENT
TO BE AWARDED
4,682
MILES OF
RAIL LINES
US$12.11 billion
ESTIMATED INVESTMENT
63.1%
GROWTH
OF AMOUNT OF CARGO
HANDLED THROUGH BRAZIL’S
PORTS FROM 2003-2013
US$2.7 billionESTIMATED INVESTMENT
4
INTERNATIONAL
AIRPORTS
1. BR-476 PR
BR-153 PR/SC
BR-282 SC
BR-480 SC
2. BR-364 GO/MG
3. BR-364 MT/GO
BR-060 GO
4. BR-163 MT/PA
5. BR-364 RO/MT
6. BR-262 MS
7. BR-267 MS
8. BR-470 SC
BR-282 SC
9. BR-101 SC
10. BR-280 SC
11. BR-101 RS
BR-116 RS
BR-290 RS
BR-386 RS
12. BR-101 SP/RJ
BR-493 RJ
BR-465 RJ
13. BR-262 MG
BR-381 MG
14. BR-101 BA
15. BR-101 PE
BR-232 PE
HIGHWAYS
RAILWAYS
BNDES will be able to finance up to 70% based on long-term interest rates and up to 20% based on
market rates, regardless of whether infrastructure bonds have been issued.
Brazilian airports are an essential part of the
country’s business infrastructure, responsible for
processing 210 million passengers in 2014.
Demand for air travel, both domestically and
internationally, grew at a rapid annual rate of
10.4percentintheperiod2003to2014.This,com-
bined with the approach of major international
sporting events hosted by Brazil in 2014 and 2016,
has led the Brazilian government to divide invest-
ment in airports into two parts: international air-
ports and regional airports.
In 2012, concession contracts were awarded
to the private sector for the operation and ex-
pansion of the international airports in Natal
(São Gonçalo do Amarante), Brasília, Campinas
(Viracopos) and São Paulo (Guarulhos) — the
largest passenger airport in Latin America.
The airport investment plan is structured
in three parts. The first part comprised the two
major international airports for which conces-
sions were granted in 2013: Galeão, in the state of
Rio de Janeiro, and Confins, in the state of Minas
Gerais. Together, these airports generate invest-
ments worth over US$4.6 billion.
The second part of the program foresees in-
vestments worth over US$3.6 billion in 270 re-
gional airports. The program will strengthen and
restructure Brazil’s regional aviation network, ex-
panding air transport supply and improving the
quality of airport infrastructure and services.
Finally, the third part revolves around the
induction of commercial exploration of private
airports dedicated exclusively to general aviation.
The new concessions of airports seek to ex-
pand the infrastructure, improve the quality of
services, bring more innovation and experience
of international operators, boost tourism, im-
prove cargo transportation and create new re-
gional hubs.
Together, the regional and international
airports selected for the next round of conces-
sions represent a total planned investment of
US$2.7 billion.
The main goal is to improve logistics integra-
tion between all modes of transportation in order
to enhance Brazil’s competitiveness. It is expect-
ed that investments in infrastructure will boost
the country’s economic growth and will support
Brazil’s sustainable development.
INVESTMENT OPPORTUNITIES IN
BRAZILIAN INFRASTRUCTURE
INVESTMENT OPPORTUNITIES IN
BRAZILIAN INFRASTRUCTURE
AUCTIONS 2016
AUCTIONS 2015
EXISTING CONCESSIONS
Sources: Investment Guide to Brazil 2014; Program of Investment in Logistics 2015-2018
Exchange rate as of June 22, 2015
AÇAILÂNDIA/MA –
BARCARENA/PA
LUCAS DO RIO VERDE/MT –
MIRITITUBA/PA
BIOCEANIC RAILROAD–
BRAZILIAN STRETCH
PALMAS/TO –
ANÁPOLIS/GO
ANÁPOLIS/GO –
TRÊS LAGOAS/MS
RIO DE JANEIRO/RJ –
VITÓRIA/ES
RAILWAYS
NEW PROJECTS
EXISTING LINES
MOST IMPORTANT
PUBLIC PORTS
WITH CONCESSIONS TO BE AWARDED
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Special Advertising Feature
INVESTMENT OPPORTUNITIES IN
BRAZILIAN INFRASTRUCTURE
INFRASTRUCTURE INVESTMENT
SHARPENS BRAZIL’S
COMPETITIVE EDGE
Brazil is a reliable and sustainable source of food to
an increasingly large number of countries, as barriers
to its products are lowered or eliminated. Higher
yields in agriculture, a sophisticated manufacturing
sector that produces goods ranging from furniture
to airplanes to pharmaceuticals, and an expanding
service sector catering to the demands of the new
middle class form a diversified and vibrant landscape.
The financial sector is well capitalized and Brazil
is on the forefront of the implementation of Basle III
regulations, reflecting the strength of banks and the
effectiveness of financial supervision carried out by
the Central Bank of Brazil. Capital markets continue
to grow, with an outstanding stock of private bonds
in excess of US$710 billion in government bonds. The
Bovespa stock exchange is one of the largest and busi-
est in emerging markets, with numerous infrastructure
companies listed. The insurance sector has been grow-
ing at double-digit rates for several years.
Another favorable feature of Brazil is the openness
of its society, manifested in the
freedom of the press and of
religion, and the strength of its
institutions. A well-developed
regulatory framework and the
effective upholding of the law
by local and national courts also
contribute to the democratic
stability of the country and are relevant to any long-
term investor. The absence of geopolitical risk is also
an often-noted advantage of Brazil as a destination to
private investments.
The Brazilian population is relatively young, with
the median age just above 25. It is also the result of a
true ethnic melting pot, where people from all conti-
nents have forged a national identity, while preserving
tremendous diversity.
The government’s priority to ensure sustainable, in-
clusive economic growth and more opportunities for all
Brazilians is at the heart of public policies. The Brazilian
government sees its commitment to good macroeco-
nomic management as crucial to achieve its objectives.
Fiscal responsibility, floating exchange rates and
a successful inflation-targeting regime continue
to play a key role in boosting investor confidence
and in supporting private investment. Recent talks
with Mexico and the European Union to establish
free-trade agreements, as well as trade facilitation
initiatives — notably with the United States — will help
further integrate the country in the global value chains
and make it more competitive. Carefully implemented
social programs, on the other hand, have been able to
expand the opportunities for the youngest Brazilians,
and to provide an effective safety net to the eldest.
To these advantages, Brazil is adding the prospect of
an improved transport infrastructure through the second
round of the Logistic Investment Program, (PIL). This
program builds on more than 25 years of successful
concessions of roads, railroads, ports and airports in
Brazil. Plus, it aims at connecting the main production
areas to key international gateways, lowering production
and distribution costs, and enhancing companies’
competitiveness in the global market place.
BRAZIL’S RECORD ON PRIVATE INFRASTRUCTURE
Infrastructure operations run by the private sector
have a long and successful record in Brazil. The iconic
cable car connecting the Sugar Loaf hills in Rio de
Janeiro, for example, has been operated by private
capital for more than a century.
Private companies are vested in water and
sanitation, electricity, telecommunications, gas
distribution, roads, railroads, ports and airports,
among other industries. Many of these concessions
are operated by international companies, and
more than a few are listed in the Brazilian stock
exchange. The willingness of consumers to pay for
quality services has been a constant throughout
these sectors.
The Brazilian ports in particular — one of the first
sectors to be opened in the early 1990s — illustrate
the extraordinary success of private participation in
the country’s infrastructure. In the 20 years since,
traffic grew several-fold, the speed of movement
increased significantly and many private terminals
opened. And just as the early concessions were to
expire, a new law further opened the sector to private
capital by facilitating the construction of private
terminals by operators that were not aiming to move
their own cargo.
More than 50 private terminals have been autho-
rized and built since then, including several belonging
to grain-trading companies. The second round of the
PIL foresees more authorizations and the concession
of many areas in public ports.
Asimilarrecordofsuccessfullong-terminvestments
can be found in other infrastructure segments, such as
airports and roads. There, keen competition among
various players has helped lower tolls and fees, and
foster investment.
INVESTING IN LOGISTICS IN BRAZIL NOW
The second round of PIL includes more than just
ports. It includes the concession of more than a dozen
roads,wheretheoperator will be responsibletoexpand
these roads, linking agriculture and manufacturing
clusters to ports. There are also at least four large
airports and many local airports to be offered to the
private sector.
The private sector is also invited to invest in rail-
roads, notably in the operation of the Norte-Sul tracks
built by the government in the last decades. The winner
of this concession will be responsible to extend these
tracks by about 300 miles in order to reach the mouth
of the Amazon. Such an investment will complete a lo-
gistics backbone that will allow significantly more than
20 million tons of grain and minerals a year to reach
markets in Europe and Asia at substantially lower cost
than through the traditional, existing routes.
The second round of the PIL has an additional
novelty, which is the greater reliance on the financing
by the private sector, including
through project bonds and
new instruments designed to
provide the necessary comfort
to long-term investors.
Project bonds, notably in
local currency, are already a
reality in Brazil, with strong
performance and increasing secondary trade in local
markets. The Brazilian government is working closely
with financial institutions, including multilaterals,
institutional investors and partner countries in the
G20, to develop adequate enhancements to such
bonds and similar instruments.
The scale of the PIL and other infrastructure proj-
ects in Brazil eligible to be financed by tax-exempt
project bonds make these instruments an interesting
asset class on its own.
MACROECONOMIC STABILITY AS THE BEDROCK FOR
SUCCESSFUL LONG-TERM INVESTMENT
The strengthening of the applicable regulatory
framework and an unshakable commitment to fiscal
and monetary stability are irreplaceable ingredients
to make the Logistic Investment Program and the new
financinginstrumentsdesignedtosupportrealsuccess.
Together, they can open new valuable opportunities
to local and international investors, providing steady,
long-term income streams backed by quality projects
in several fields. Tax-exempt investment funds aimed
at facilitating risk diversification and providing
liquidity to those project bonds complete this strategy
and have already been authorized.
B
razil is one of the top seven economies in the world. It has a diversified economy with strengths in energy,
agriculture, manufacturing and services. Brazil is one of the countries with the cleanest energy sources in the
world, and it is a large producer of oil and gas. The country’s consumer market is already among the sixth
largest in the world, but it has tremendous growth potential, as more and more Brazilians reach the middle class
and become more educated. In fact, the number of people in college has doubled in the last 10 years, reaching
seven million. This is a college population similar to those in the U.K. or Germany.
BRAZIL’S
INFRASTRUCTURE
INVESTMENTSHAVE
TRIPLEDOVERTHE
LAST10YEARS.
“The time has come to build the basis for a new cycle of
development and growth for the country.”
— NELSON BARBOSA, PLANNING MINISTER
FOR MORE INFORMATION, VISIT INFRASTRUCTURE BRASIL: HTTP://INFRASTRUCTUREBRASIL.BRASILEXPORT.GOV.BR/SITES/ESTADOSUNIDOS/
MINISTRY OF PLANNING, MANAGEMENT & BUDGET (MPOG)
WWW.PLANEJAMENTO.GOV.BR
CONTACT: INVESTIMENTOSBRASIL@PLANEJAMENTO.GOV.BR
MINISTRY OF EXTERNAL RELATIONS (MRE)
WWW.BRASILEXPORT.GOV.BR
CONTACT: WWW.BRASILEXPORT.GOV.BR/ASK-BRASIL-EXPORT
APEXBRASIL (BRAZILIAN TRADE & INVESTMENT PROMOTION AGENCY)
WWW.APEXBRASIL.COM.BR
CONTACT: INVESTINBRASIL@APEXBRASIL.COM.BR
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