Concerns Rise for 2025 Investments Amid Tax Reforms, Currency Fluctuations, and Interest Rates

As Brazil gears up for a significant year in infrastructure development, experts are raising concerns regarding potential hurdles for investments in 2025. Natascha Schmitt, a specialist in Public-Private Partnerships (PPPs) and infrastructure, indicated that while 2025 is anticipated to be a pivotal year for infrastructure projects, several challenges loom that could affect the investment landscape.

The Brazilian government has outlined numerous projects in key sectors such as sanitation, energy, and transportation for this year. However, Schmitt emphasizes that the impending tax reform poses a major concern. While aimed at simplifying Brazil's tax system and enhancing the economic environment, the reform's implementation is expected to introduce changes that could affect both new contracts and existing agreements. This situation may necessitate renegotiations and financial adjustments.

In addition to tax reform, Schmitt pointed out the issues of currency depreciation and rising interest rates as significant threats to investment viability. The weakening of the national currency, coupled with increased interest rates, could escalate project costs and heighten investment risks, subsequently diminishing expected returns.

Despite these challenges, the expert maintains that the year holds promise, citing an increase in the number of auctions planned for 2025. The forecast suggests a rise from approximately 40 auctions in 2024 to nearly 90 in the coming year, indicating a robust pipeline of opportunities.

Among the notable projects set to unfold are:

• Sanitation: Contracts anticipated to bring in R$ 69 billion, including concessions across various states such as Pará, Pernambuco, and Rondônia, as well as a PPP focused on sewage treatment in Paraíba.
• Energy: Efforts to establish a new legal framework and renew concessions for distribution companies.
• Road Infrastructure: Projects with R$ 94 billion slated for investment, featuring eight new auctions and seven contract renegotiations.
• Railways: Renewal of the Centro-Atlântica Railway (FCA), along with a R$ 17 billion agreement with Vale and the National Railway Plan.
• Aviation: Development of 51 regional airports.
• Ports: Plans for 21 terminal leases, including a superterminal for containers in Santos and the Santos-Guarujá tunnel.

As Brazil navigates the complexities of economic reforms and infrastructure expansion, stakeholders will need to remain vigilant and adaptable to the shifting investment climate.