BRAZIL Trends and Developments Contributed by: Ana Carolina Nomura and Flávio B. Lugão, Mattos Filho
ture across the full spectrum of investment funds in Brazil, including Brazilian REITs (FIIs), FIPs, FIDCs and FI-Infra. This structure enhanced the efficiency of risk alloca - tion, allowing retail, institutional and pension fund investors to occupy the senior tranches while private capital funds and high net worth individuals captured the upside (and downside) of subordinated tranches. The result was a broadening of the investor base and a more dynamic capital allocation system. The trend also aligned Brazil more closely with global practices, where private credit has become a key asset class in alternative funds, bridging the gap left by more cautious banking systems. Infrastructure and climate finance: a new frontier The infrastructure sector has remained a cornerstone of Brazil’s investment agenda in 2025. The defining theme was the conclusive rise of climate transition as a strategic driver, both from a public policy perspec - tive and from market positioning. Infrastructure funds (FI-Infra) became increasingly rel - evant as exempted vehicles and as means for chan - nelling incentivised debentures – assets that had historically remained on commercial banks’ balance sheets. Their migration into fund structures facilitated broader participation, including by institutional – and even retail – investors through exempted structures, alongside independent managers and pension funds. The launch of the National Development Bank of Brazil’s climate and energy transition tenders further amplified this momentum. These initiatives unlocked significant pools of capital targeted at sustainable pro - jects: renewable energy, natural capital, climate adap - tation infrastructure, and beyond. Importantly, many of the resulting vehicles were structured in partnership with independent managers, pension funds, multilat - eral banks, and international investors. As a result, Brazil consolidated its position as one of the world’s leading destinations for climate capital. This was not only due to its natural endowments – biodiversity, a relatively clean energy matrix, and agri - cultural capacity – but also to the technical capabil -
ity of its fund industry to absorb and operationalise international capital in structures aligned with global ESG standards. Brazil has become one of the leading emerging markets destinations for climate finance; yet its combination of natural resources and sophisticated fund structures provides a distinct competitive edge to other jurisdictions. Outlook for 2026: lower rates, political uncertainty, and new liquidity pathways Looking ahead, being a presidential election year, 2026 inevitably carries a degree of uncertainty. Politi - cal cycles in Brazil tend to heighten volatility, particu - larly in the second half of the year. However, economic fundamentals entering this period are stronger than in previous cycles. Inflation remains under control, the exchange rate has recently shown relative stability, and market consensus points toward a downward trajectory for the Selic base rate. The most recent decision by the Monetary Policy Committee (COPOM) held rates steady, marking a shift from the previous cycle of rising rates. Expec - tations remain anchored for gradual easing over the course of 2026. Should this materialise, it could lead to a more pronounced recovery in economic activity and capital markets. Lower borrowing costs would not only support corporate refinancing but also stimulate demand for alternative fund structures, particularly in private credit and infrastructure. Another trend expected to continue into 2026 is the rebound of M&A activity. After a challenging 2024, transaction volumes have picked up in 2025, and this momentum is likely to carry forward. This is particu - larly significant for private equity funds as it represents the materialisation of returns, and reinforces the suc - cess narrative that is essential in a fundraising cycle expected to regain momentum in the coming quarters. At the same time, liquidity themes already mature in international markets – such as fund finance, continu - ation funds, and secondary transactions – are begin - ning to gain traction in Brazil. With the continued evolution and institutionalisation of the local industry, there is significant potential for these mechanisms to expand in the coming years, offering fund managers new tools to generate liquidity, optimise portfolios, and provide investors with greater optionality.
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