Obama to offer infrastructure finance for Brazil

By Reuters
Posted Feb. 22 at 11:40 a.m.

President Barack Obama plans to offer new financing for joint infrastructure projects between U.S. and Brazilian companies when he visits Brazil next month, part of efforts to strengthen ties between the Western Hemisphere’s two biggest economies, sources say.

The financing, which would be worth hundreds of millions of dollars or more annually, would allow U.S. companies to play a bigger role in Brazil’s planned building boom as it prepares to host the World Cup in 2014 and the Olympics in 2016.

The proposal would also involve funding joint ventures to build infrastructure projects in other countries — mainly in Africa, where the United States and Brazil are both eager to limit the rising influence of Chinese companies.

U.S. and Brazilian officials have been discussing the arrangement for months, although some legal and regulatory issues still need to be addressed. They hope to finalize a deal when Obama visits Brazil on March 19-20, sources from both governments told Reuters. They spoke on condition of anonymity as they were not authorized to discuss what would be one of the main policy announcements of Obama’s first trip to Brazil.

The vehicle for the financing would be the Export-Import Bank of the United States, or Ex-Im Bank. It has seen its role expand dramatically in the last two years as the Obama administration looks for business opportunities abroad to help bring down a near double-digit jobless rate at home.

Ex-Im Bank seeks to make an unspecified amount of funding available for U.S.-based companies and U.S. subsidiaries of multinationals to help build roads and other infrastructure projects in Brazil, Ex-Im Bank Chairman Fred P. Hochberg said.

“Brazil is a place where we see major promise, a lot of potential for cooperation,” he told Reuters. “Investment in infrastructure (in emerging markets) is growing at a level we’ve never seen before.”

Funds for joint U.S.-Brazilian projects in other countries would be provided through a “co-financing” deal between Ex-Im Bank and Brazil’s state-run development bank, BNDES. Such arrangements provide a “one-stop shop” with one set of documents and financing conditions for joint ventures.

Ex-Im Bank has similar deals with banks in Canada, Germany and other developed countries but an agreement with Brazil would be its biggest such foray into an emerging market.

Ex-Im Bank’s firepower is formidable: it authorized a record high $24.5 billion in loans, guarantees and insurance worldwide in last fiscal year and is on track for another record this year, Hochberg said.


A U.S. deal with Brazil would build on a sudden warming in the diplomatic relationship.

Brazilian President Dilma Rousseff, a pragmatic leftist who took office on Jan. 1, seeks more U.S. investment and trade to help meet her goal of eradicating extreme poverty by 2020.

Several high-profile projects related to the World Cup and Olympics, including soccer stadiums and airport renovations, are running well behind schedule, so additional U.S. involvement could help.

Brazilian soccer legend Pele has warned that the country runs “a great risk of embarrassing itself” at the World Cup unless the pace of construction accelerates.

The prospect of more financing for its companies’ work in Africa is also attractive from Brazil’s perspective.

Brazilian companies such as construction firm Odebrecht have enjoyed strong business ties in Africa, particularly in Portuguese-speaking countries such as Angola and Mozambique, but they have struggled to compete in recent years with better-financed Chinese competitors.

U.S. companies have also often struggled in Africa, and could benefit from the cultural knowledge and technical expertise offered by joint ventures with Brazilian firms.

Other possible items on Obama’s agenda in Brazil include:

– The possibility of cooperation aimed at convincing China to let its currency appreciate faster, which could ease global trade imbalances.

– Plans to increase bilateral trade, which has fallen as a percentage of Brazil’s overall trade in recent years

– A multi-billion dollar Brazilian Air Force contract for which Boeing is competing.

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