UPDATE 2-Brazil raises rate of return on roads, other projects

viernes 10 de julio de 2015 19:09 GYT

(Recasts with official comments and context)

By Alonso Soto and Luciana Otoni

BRASILIA, July 10 (Reuters) - Brazil raised the rate of return on new highway concessions and will do the same for other infrastructure projects to woo much-needed investment into the sluggish economy, a senior government official said on Friday.

The government hiked the rate of return for highways to 9.2 percent from a previous 7.2 percent, marking a change in stance by President Dilma Rousseff, who has been criticized for scaring off investors with below-market rates of return.

Deputy Planning Minister Dyogo de Oliveira said in an interview the government will raise internal return rates, or IRR, on port, airport and railway projects as financing costs climb in Brazil.

"The cost of capital in Brazil has increase and the IRR has to reflect that. We will review the IRR for other modalities," Oliveira said. "Without a doubt a higher IRR makes those projects more attractive for investors."

Facing an imminent recession, Rousseff has adopted more market-friendly policies to lure investors to her new 198.4 billion reais ($62.61 billion) plan to overhaul the country's decaying infrastructure.

The IRR is a measure of return on an investment that takes both the size and timing of cash flows into account. The final return rate could fluctuate depending on the highway project and its capital structure.

Oliveira said he will discuss financing options to the projects with the World Bank and Inter-American Development Bank in a trip to the United States next week. The two Multilateral lenders are willing to issue debt in the local currency to finance some of the concessions, Oliveira said.   Continuación...