A Robust Guarantee System for Infrastructure Projects in Brazil

Overview & Synopsis

Diversifying guarantee mechanisms in Brazil is essential for attracting private investment in infrastructure. Strong guarantees enhance legal security and reduce perceived risk, making it easier for new investors and international financiers to enter the market. This, in turn, promotes competition and lowers financing costs. Given the limited fiscal capacity of public entities to provide budgetary guarantees, adopting innovative risk mitigation solutions becomes crucial for enabling projects and fostering a more attractive and competitive environment for private investment. In this context, revising accounting rules to classify multilateral-issued guarantees as contingent liabilities would allow for a more efficient use of limited fiscal space and support their wider adoption.