Brazil's Patria to begin construction works in JV with PIF in 2026

Andre Sales, Managing Partner, CEO and Chief Investment Officer of Patria’s Infrastructure division

Brazil's Patria Investments expects that construction work on the Paraná Loti 1 highway system concession project to operate an extension of toll road in the Brazilian state of Paraná will begin in the third year of the concession term in 2026, said Andre Sales, Managing Partner & Chief Executive Officer and Chief Investment Officer of Patria’s Infrastructure division.

In an interview with Argaam, the official said that the total investments in the project, which is based on a coalition with the participation of the Public Investment Fund, are expected to reach $1.2 billion to improve, maintain and expand roads, which are considered low-complexity capital expenditures. He expects that improving the highway infrastructure will contribute to accelerate the development of local communities, improving residents' access and proximity to goods.

Patria has allocated about $90 billion over the next 5-7 years to invest in specific infrastructure opportunities in Latin American countries, which are opportunities that can attract partners in GCC countries, such as electricity and energy, where investments focus mainly on renewable energy projects such as solar energy, wind energy, distributed generation, and other opportunities related to the energy transition, logistics and transportation, said Salles.

He pointed out that the company believes that the bilateral relationship between Brazil and the Kingdom of Saudi Arabia is the key to the continued economic and investment development of both countries, indicating that it will continue to be a strategic partner for the region through its field presence and through the alignment of interests in the long term.

Below is the interview in details:

Q: Can you provide more details about the objectives of the 30-year concession partnership between PIF and Patria Investments for the toll road project in the Brazilian state of Parana?

A: In August 2023, through a consortium including Patria Infrastructure Fund V and two global institutional investors, including PIF, Patria won the auction for the Paraná Lote 1 highway system concession, to operate the 473 km long stretch of toll road in the Brazilian state of Paraná. The project is expected to receive a total investment of $1.2 billion to improve, maintain and expand roads, which is considered a low-complexity capital expenditure.
 

The investments include a dual way with a length of 344 km, in addition to additional lanes, marginal paths, bicycle paths, bridges, ditches and crossings across the extension of the road. Construction work on this project is expected to begin in the third year of the concession period (2026). Improving the infrastructure highways, with regard to the safety of users and the quality of services provided, is expected to advance the development of local communities, and as a result, we hope that investments will contribute to improving residents’ access and proximity to the movement of goods.
 

This investment contributes to consolidating Patria’s footprint in the toll road sector in Brazil and Latin America, as it is the sixth concession for toll roads for Patria, and was preceded by three other roads in Brazil and two in Colombia. With the new concession, the length of toll roads that Patria operates will reach about 4000 km.
 

Q: In discussing the growing interest from GCC nations and sovereign funds in Latin America, what unique opportunities and challenges do you see in this evolving landscape?

A: Patria recognizes that Latin America suffers from bottlenecks and structural gaps in all infrastructure segments, and expects that it will take a long time to address them. Challenges of the Brazilian infra framework is shown in the World Economic Forum’s Infrastructure Ranking: In the latest report, published in 2019, Brazil ranked 78 out of 141 countries in terms of overall infrastructure quality. Moreover, few public policies generate greater consensus in the region than the need to invest more in infrastructure.
 

Also, private capital in infrastructure is crucial to address the infrastructure gaps in the region, given the strong retraction of public investments in infrastructure over the past decade (that was reduced by ~57% between 2010 and 2021) highlights the need of private capital in the sector.
 

This is expected to result in unique opportunities in the infrastructure landscape across the region, becoming the source of sizable and attractive investment opportunities in essential infrastructure, such as in Power and Energy, Logistics & Transportation, Data Infrastructure, Environmental Services. Additionally, in the context of fiscal adjustment, current governments have further prioritized the agenda of infrastructure investments for private investors, generating a sizable wave of opportunities in concessions, privatizations and PPPs.
 

Also, the encouraging long-term growth prospects of the region’s domestic markets is expected to generate further demand for infrastructure that will boost the attractive investment environment for private capital.
 

In a region with large infrastructure deficits and strong demand for infrastructure projects, Patria believes the best opportunities for attractive returns are mostly associated with investments that address the infrastructure bottlenecks, gaps and inefficiencies.

Q: Considering the diverse sectors that Patria manages, can you provide examples of specific industries or projects that GCC-based partners might find attractive, and how does this align with the broader investment goals in Latin America?

A: Patria identified approximately $90 billion over the next 5 to 7 years in selected equity infrastructure opportunities in Lattin American countries that GCC-based partners might find attractive, such as electricity and energy, which focus mainly on renewables projects such as solar, wind and distributed generation, and additional energy transition related opportunities; logistics and transportation services that focus on brownfield toll roads, commodities logistics opportunities, and e-mobility, as well as data infrastructure that is mainly driven by the implementation of 5G networks and data centers, along with environmental services that are focused in the privatization of sanitation assets in Brazil, water desalination opportunities in Chile and Peru and waste management opportunities across Latin America.
 

Patria believes these opportunities are attractive for GCC-based partners, since they are aligned with their long-term investment goals, which include investing in crucial economic sectors, such as clean energy and energy transition related assets and in infrastructure projects such as in the logistics and transportation and digital infrastructure sectors, in which selected Latin American countries have attractive opportunities.

Q: Given the current economic climate, how does Patria Investment assess and mitigate potential risks associated with large-scale infrastructure investments, and what safeguards are in place for investors?

A: Over the last 17 years, Patria has developed a set of guidelines to consider an investment from risk management standpoint. Those guidelines serve as framework for the investment team to identify the main risks of the thesis and to design a thorough risk mitigation plan.
 

For large scale infrastructure investments, for example, Patria’s gradual capital deployment strategy works as a broad risk mitigation strategy, allowing Patria to increase/decrease capital commitments to its theses depending on the progress of each investment. Also, Patria generally requires control or joint control in its investments, which Patria believes provides an essential lever in its business model on closely managing risks and on imprinting its governance and compliance policies at the portfolio companies.
 

In addition, revenue visibility is pursued either through a relevant portion of long-term contracts with reputable counterparts or through concession contracts, in each case to protect an investment’s value against inflation.

Q: With the evolving investment landscape between Saudi Arabia and Latin America, how does Patria foresee adapting its financial strategies to capitalize on emerging opportunities?

A: Patria has been a trusted partner for 35 years being the gateway for alternatives in Latin America for the global institutional capital. In this evolving investment landscape between Saudi Arabia and Latin America, the Company aims to capitalize the emerging opportunities of the region by providing investment solutions aligned with the long-term vision and objective of the Saudi-partners. With on the ground expertise and investment capabilities, Patria has mapped opportunities across Latin American countries which are aligned with GCC-based partners investment goals in crucial economic sectors, such as infrastructure, renewables and energy transition.
 

Moreover, Patria’s collaboration with local experts and its experience in financial strategies allows the Firm to provide customized solutions and alternatives to the Saudi-partners. Finally, Patria believes that the bilateral relationship between Brazil and Saudi Arabia is key for the continuous economic and investment development for both countries. In this sense, Patria, will continue to be strategic partner of the region with boots on the ground and long-term alignment of interests.

Q: Could you elaborate on the strategic significance of Saudi Arabia's recent invitation to join BRICS and how it aligns with the objectives of the PIF and Patria partnership?

A: Saudi Arabia trade links with Latin America grew significantly (10% annually) over the last 20 years, a number 6x larger today than before. Still, there is further space to grow given the latter is still a small portion of the total share. Joining the BRICS (and expanding the Global South) means we should see even stronger growth going forward. For instance, Brazil and Saudi Arabia alone are committed to trade around US$ 20 B by 2030.
 

Foreign direct investments (FDI) links should also trend up. PIF is expected to commit US$ 10 B over the next years in Brazil in sectors such as clean energy, green hydro, defense, technology, and agriculture. Patria is well positioned to capture a great share of those opportunities as it has been a sector-focused specialist in the region with over 35 years of experience.
 

As for the sustainable development goals, specifically the green transition, Saudi Arabia is committed to achieve its green agenda with the goal of reaching Net Zero Carbon emissions by 2060 and to achieve its Nationally Determined Contribution of reducing CO2 emissions by 278 million tons annually by 2030. Additionally, PIF is committed to developing 70% of Saudi Arabia’s renewable energy target by 2030. Latin America currently generates 59% of its electricity energy trough renewable sources, the largest share worldwide and significantly above the 28% global average.