FOREIGN EXCHANGE RISK MITIGATION STRATEGIES BENCHMARKING STUDIES REPORT May 19, 2021 Disclaimer: The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Brazilian Ministry of Economy. The Brazilian Ministry of Economy does not guarantee the accuracy of the data included in this work. 1 INDEX DEFINITIONS ............................................................................................... 6 INTRODUCTION AND SCOPE OF WORKS ....................................................... 9 METHODOLOGY AND ACKNOWLEDGMENTS ................................................. 13 EXECUTIVE SUMMARY................................................................................. 17 BENCHMARKING STUDIES .......................................................................... 34 BRAZIL ..................................................................................................... 34 General Overview ................................................................................... 35 Foreign Exchange Controls ....................................................................... 36 Infrastructure Needs, Opportunities and Legal Regimes ............................... 38 Foreign Investment in Infrastructure: Cross-border Project Financing ........... 41 Foreign Exchange Risk Mitigation .............................................................. 43 ARGENTINA ............................................................................................ 64 General Overview ................................................................................... 64 Foreign Exchange Controls ....................................................................... 68 Infrastructure Needs, Opportunities and Legal Regimes ............................... 70 Foreign investment in Infrastructure: Cross-border Project Financing ........... 72 Foreign Exchange Risk Mitigation .............................................................. 74 CHILE .................................................................................................... 78 General Overview ................................................................................... 78 Foreign Exchange Controls ....................................................................... 82 Infrastructure Needs, Opportunities and Legal Regimes ............................... 84 Foreign investment in Infrastructure: Cross-border Project Financing ............ 86 Foreign Exchange Risk Mitigation .............................................................. 87 COLOMBIA ............................................................................................. 91 General Overview ................................................................................... 91 Foreign Exchange Controls ....................................................................... 94 Infrastructure Needs, Opportunities and Legal Regimes ............................... 96 Foreign investment in Infrastructure: Cross-border Project Financing ........... 99 Foreign Exchange Risk Mitigation ............................................................ 101 INDIA ..................................................................................................... 103 General Overview ................................................................................. 103 2 Foreign Exchange Controls ..................................................................... 106 Infrastructure Needs, Opportunities and Legal Regimes ............................. 109 Foreign investment in Infrastructure: Cross-border Project Financing ......... 112 Foreign Exchange Risk Mitigation ............................................................ 117 INDONESIA .......................................................................................... 120 General Overview ................................................................................. 120 Foreign Exchange Controls ..................................................................... 124 Infrastructure Needs, Opportunities and Legal Regimes ............................. 127 Foreign investment in Infrastructure: Cross-border Project Financing ......... 128 Foreign Exchange Risk Mitigation ............................................................ 131 MEXICO ............................................................................................... 135 General Overview ................................................................................. 135 Foreign Exchange Controls ..................................................................... 138 Infrastructure Needs, Opportunities and Legal Regimes ............................. 139 Foreign investment in Infrastructure: Cross-border Project Financing .......... 142 Foreign Exchange Risk Mitigation ............................................................ 143 PERU ................................................................................................ 147 General Overview ................................................................................. 148 Foreign Exchange Controls ..................................................................... 150 Infrastructure Needs, Opportunities and Legal Regimes ............................. 150 Foreign investment in Infrastructure: Cross-border Project Financing ......... 152 Foreign Exchange Risk Mitigation ............................................................ 153 SOUTH AFRICA ..................................................................................... 156 General Overview ................................................................................. 156 Foreign Exchange Controls ..................................................................... 159 Infrastructure Needs, Opportunities and Legal Regimes ............................. 161 Foreign investment in Infrastructure: Cross-border Project Financing ......... 163 Foreign Exchange Risk Mitigation ............................................................ 164 TURKEY .................................................................................................. 167 General Overview ................................................................................. 167 Foreign Exchange Controls and Stabilization Mechanisms ........................... 170 Infrastructure Needs, Opportunities and Legal Regimes ............................. 172 3 Foreign investment in Infrastructure: Cross-border Project Financing .......... 175 Foreign Exchange Risk Mitigation ............................................................ 177 EXHIBIT A: CASE STUDIES SUMMARY ............................................................ 180 EXHIBIT B: FORM OF QUESTIONNAIRE .......................................................... 189 EXHIBIT C: REFERENCES ................................................................................ 191 4 INDEX OF TABLES Table 1. Meetings Conducted by Machado Meyer ..................................................... 14 Table 2. Argentina’s Infrastructure Projects: Electricity Sector .................................. 71 Table 3. Guarantee Structure of RenovAr Program .................................................. 77 Table 4. Sources of Debt Financing in India .......................................................... 116 Table 5. Turkish PPP Milestones .......................................................................... 174 INDEX OF FIGURES Figure 2. Classification: Restriction of Convertibility.................................................31 Figure 3. Availability and Depth for Long-Term Project Financing...............................32 Figure 4. Governmental Mitigation Instruments.......................................................33 Figure 5. Brazilian GDP per capita growth (annual %)..............................................35 Figure 6. Argentine GDP per capita growth (annual %).............................................67 Figure 7. Chilean GDP per capita growth (annual %)................................................82 Figure 8. Exchange Rate Band and Observed Exchange Rate.....................................83 Figure 9. Colombian GDP per capita growth (annual %)...........................................92 Figure 10. Indian GDP per capita growth (annual %)..............................................106 Figure 11. Indonesian GDP per capita growth (annual %).......................................122 Figure 12. Mexican GDP per capita growth (annual %)...........................................136 Figure 13. Mexico Manufacturing Industries..........................................................136 Figure 14. Peruvian GDP per capita growth (annual %)..........................................148 Figure 15. South African GDP per capita growth (annual %)....................................158 Figure 16. Turkish GDP per capita growth (annual %)............................................168 Figure 17. Change in Average Worldwide Governance Indicators.............................169 Figure 18. Turkey Map: Regions based on Development Level of the Districts and Cities ......................................................................................................................177 5 DEFINITIONS “ABGF” means the Brazilian Agency for “CBEE” means Companhia Brasileira de Management of Guarantee Funds and Energia Emergencial; Gurantees; “CBRT” means the Central Bank of the “ADB” means the Asian Development Republic of Turkey; Bank; “CDI” means Certificado de Depósito “AK” means