Insights: How the UAE can leverage investment opportunities in Brazil
The partner and chief economist at Patria Investments explores the untapped potential for UAE entities, particularly SWFs, to address Brazil’s crucial infrastructure needs, while fostering mutual economic growth
Fifty years ago, Brazil and the UAE established diplomatic relations.Over time, this relationship has become steadily stronger, befitting their mutual status as economic engines and hotbeds of innovation.
Brazil and the UAE share similar paths and are members of many of the same clubs — notably the multilateral BRICS group, which Brazil co-founded and which the UAE joined in January 2024.
Merchandise trade between the two nations has grown at an annual rate of 14 per cent over the past 26 years – double the world average – and reached $6bn in the 12 months ending October 2024. But while impressive, that represents only 1 per cent of each country’s total foreign commerce, thus hinting at immense untapped potential.
Investment in infrastructure development presents an opportunity to deepen the economic relationship between these kindred states. This is also an area where UAE entities, including its many sovereign wealth funds (SWFs), are keen to diversify their portfolios. It also matches up well with Brazil’s need to address the significant infrastructure gaps in areas from power generation to logistics and transportation and from data centres to environmental services.
Addressing these gaps is crucial as they threaten to dampen Brazil’s growth and productivity. The World Bank has noted the importance of modern infrastructure, including digital, “to create more and better jobs” for the people of Brazil.
Meanwhile the World Economic Forum’s January 2024 report on global growth places Brazil’s infrastructure at the middle of the pack with a score of four on a scale of one to seven, where seven is best.
At the same time, Brazil has significant advantages for investors: stable institutions, a foothold in a market of 203 million people, a credible central bank, a resilient financial system, the initiation of tax reforms, a market-driven economy, and a robust labour market; indicating that Brazil’s infrastructure sector offers a variety of attractive risk-adjusted opportunities.
Middle East investments in Brazil
Middle East investments in Brazilian infrastructure have been making some headway, most recently with Saudi Arabia’s Public Investment Fund (PIF) investing in Brazil’s transportation infrastructure, following a bid in a recent round of Brazilian government auctions for toll-road concessions. Deals such as this could work well for UAE investors too, particularly SWFs.
Across Latin America, where the Brazilian economy is the largest one, we see many projects that prioritise sustainable and inclusive development in compliance with SDGs and ESG principles, while also presenting an attractive range of risk-adjusted options for investors, especially those supporting energy transition.
We see opportunities for approximately $90bn worth of investment in Latin American infrastructure development projects in related sectors, from toll-road concessions in Brazil and Colombia to privatisation of sanitation assets in Brazil, water desalination in Chile and Peru and waste management across the region.
To take advantage of these manifold openings, it can be useful for Middle East investors to team up with specialised partners and advisors who understand that navigating the reefs and shoals of a large emerging market in Latin America requires more than just capital. It also demands regional expertise and a diversified investment platform.
From our experience, we have addressed international investors’ concerns over the years, especially those around sub-national risks.
Infrastructure assets have long-term contracts, oftentimes inflation indexation, and a long track record of solid regulatory agencies. In toll roads, as we have seen with PIF’s investments, there are 20 to 30-year-old concessions with reputable regulatory agencies in place, respecting contracts, and providing stability to the investment.
It is important to remember that trade must be two-way to thrive. There are also paths by which Brazilian investors can bring their funds to key economic sectors in the UAE and the wider region.
Looking forward, there remains plenty of room for growth in the UAE-Brazil relationship. By leveraging local expertise and focusing on robust, regulated sectors such as infrastructure, both nations can unlock significant mutual benefits and ensure the next 50 years of partnership are even more prosperous than the last.
