Experts say conditions are not favorable for companies
09/25/2025
The dearth of initial public offerings, high borrowing costs, and difficulties in lowering the cost of capital remain the main challenges in Brazil’s capital markets, according to government officials and financial sector representatives. They argue that it is essential to create attractive instruments for investors and proper conditions for companies to return to the stock exchange, which would help democratize and boost the market.
Brazilian Development Bank (BNDES) President Aloizio Mercadante said on Wednesday (24) that “a development bank is not just about credit” and that holding equity positions is in line with the best practices of peer institutions worldwide. Mr. Mercadante emphasized that the private sector is decisive in the capital market and that the bank’s role is to strengthen the system in strategic areas. “We cannot replace the private sector. It’s like acupuncture: we insert the needle in the right spot to make the system better,” he said at an event held at BNDES headquarters in Rio de Janeiro.
At the same event, Vice President Geraldo Alckmin highlighted that the bank’s support will be key for strategic sectors such as decarbonization, healthcare, biotechnology, startups, and critical minerals—especially at a time when borrowing costs remain high, with the Selic policy rate at around 15% per year.
While Brazil has seen no IPOs in recent years, India registered at least 100 last year, said XP CEO José Berenguer. According to him, the lag in Brazil’s market can be explained by the current level of interest rates and “the tax incentives given to fixed income.” He argued: “We continue with this habit of creating tax breaks that end up boosting fixed income and eliminating any chance for the equity market to develop.”
Itaú Unibanco CEO Milton Maluhy Filho said Brazil’s biggest challenge in equity markets is the cost of capital. “This cost has two aspects: institutional, so foreign investors can look at Brazil as a safe harbor, and legal, to ensure that investments are made under clear and reliable rules.”
He added that with the prospect of lower Selic rates, along with improvements in institutional and legal frameworks, Brazil could reduce the cost of equity and raise investment levels. Mr. Maluhy Filho stressed that foreign investment is crucial for the country’s development and that Brazil must open its borders and stimulate this market.
Treasury Secretary Rogério Ceron indicated that another sovereign sustainable bond issuance (“green bonds”), similar to those tied to the Climate Fund, could take place this year. Brazil issued its first such bond in November 2023 and a second in June 2024. The expected size of the offering is about $2 billion, or roughly R$10 billion.
Mr. Mercadante also reiterated that BNDES intends to maintain tax-incentivized debentures and that discussions about their taxation are “settled” with the Finance Ministry. He stressed that incentivized infrastructure debentures are “indispensable.” “You cannot finance a project over 25 or 30 years, as we do, without having this kind of instrument to attract the private sector.”
*By Jessica Alexandra and Victoria Netto — Rio de Janeiro
Source: Valor International
https://valorinternational.globo.com/