Brazil, China agree $20 billion infra fund

While a majority of the capital is expected to come from China, the Brazilian government is also hoping to raise money from private investors.

The governments of Brazil and China have agreed to create a $20 billion investment vehicle focused on Brazilian infrastructure.

In a MoU signed this week, the two countries laid out the foundations of the Brazil-China Cooperation Fund, which will aim to finance priority projects in the infrastructure sector. While the funds will only be drawn on a project-by-project basis, China committed to provide up to $15 billion, to be supplemented by Brazil with $5 billion.

Brazil’s acting minister of planning, development and management, Dyogo Oliveira, added that the Brazilian workers’ investment fund FI-FGTS and the private sector are also expected to contribute to financing projects. Interested parties will be able to chip in in the form of equity, debt or fund investments. Sectors targeted by the fund include energy, transport and agriculture.

Beijing hopes the vehicle will help Chinese companies get more involved in Brazil’s industry. China State Grid recently bought a 23.6 percent stake in CPFL, the country’s largest private power group.

“The implementation of the fund is unprecedented in Latin America and probably in other continents,” Brazil’s Secretary of International Affairs, Jorge Arbache, said in a statement. “The fund should be cause for great celebration and concrete demonstration of foreign interest in the country.”

While the agreement was signed this week, initial plans for the fund were first launched under former president Dilma Rousseff, who was impeached in August.