BRASILIA, Nov 20 (Reuters) - The Brazilian government on Friday altered rules to make infrastructure-backed notes more attractive to insurance companies and complementary retirement funds, in a bid to bolster investment in them.
The move comes as Brazil’s largest pension funds are reducing their investment in infrastructure, opting instead to tap into government bonds paying higher interest rates at a lower risk.
The National Monetary Council, or CMN, will allow issuers to guarantee the so-called infrastructure bonds with federal government debt.
The CMN, Brazil’s main economic policy-making body, will also allow listed insurance and complementary retirement funds to invest up to 75 percent of their portfolio in infrastructure bonds if at least 30 percent of the principal is guaranteed by government debt. It set the limit at 80 percent for privately held pension funds.
The federal government debt guarantee aims to make the bonds more attractive for investors and increase the liquidity of that asset class, the finance ministry said in a statement.
The ministry said the measures are intended to stimulate large investment firms to pour more client money into infrastructure projects to help the economy recover.
President Dilma Rousseff is struggling to pull the economy out of its worst recession in 25 years. Her government has developed a series of infrastructure concession programs, but tight credit conditions have limited the participation of investors.
The guarantee will reduce risks for investors by linking the bonds to lower-risk sovereign debt, the government said.
Deputy Planning Minister Dyogo Oliveira told Reuters last week that the government was working on measures to mitigate risks as a way to allow international pension and investment funds to bolster investments in infrastructure bonds.
Although the infrastructure bonds were created to reduce the reliance on state development bank BNDES’s long-term financing, offerings of the asset class have fallen short of expectations. (Reporting by Alonso Soto; Editing by Lisa Von Ahn)