New regulation tackles the long-lasting currency mismatch problem
The Foreign Exchange Market Legal Framework (Law No. 14,286/2021), approved on December 29, 2021, seeks to modernize the Brazilian exchange market, as well as to consolidate the rules relating to the subject.
One relevant improvement for the infrastructure sector is the permission for payment in foreign currency in "contracts entered into by exporters in which the counterparty is a concessionaire, permissionaire, licensee or lessee in the infrastructure sectors" (Article 13, item VII).
Once the new legislation goes into effect, exporters (who receive revenues in foreign currency) will be able to contract services from infrastructure companies with payment linked to foreign currency, thus matching their revenues with their costs. The infrastructure provider, in turn, will be able to use revenues from these dollarized contracts as collateral to obtain financing in dollars, expanding its fundraising possibilities.
The new framework – which goes into effect one year after its publication – expands the possibilities for dollar contracts between residents in Brazil, and should allow infrastructure providers with supply or service contracts with exporters to access financing linked to foreign currency, using their dollar revenues as a natural hedge.
The change comes at a good time, expanding the possibility of financing for the ambitious infrastructure pipeline, which includes new port, airport, and highway concessions, authorized railroads, and several projects in the energy sector.