Abstract

Unlike previous growth cycles in Brazil, the new one that will complete the Real
stabilization plan can no longer count on the state as the main financier and undertaker of
the infrastructure investments. This represents a world trend, that originated the project
finance, a way to finance heavy investments designed to make possible the private/public
partnership. The project finance separates the firm risk from the business risk, and designs
finance arrangements that are specific to each investment project. In Brazil, now that the
law that regulates concession to the private sector has been enacted and the privatization
program has been accelerated, the project finance will probably constitute the main finance
procedure for infrastructure investments. For the project finance to work, the regulatory
environment should be clear, and the contracts should be credible, preventing the public sector to be put into a corner, forced to bail out insolvent projects. A new proposal for the
BNDES system – an insurance against the macroeconomic risk in credit operations – is laid
out. This proposal aims at building a long-term credit market in Brazil.

JEL Classification: H30; O40.