The most active Latin American country in terms of new SWFs is Brazil, where several cities and states have set up their own savings vehicles, under the umbrella of FFSB. We were delighted to catch up with Dr. Fernanda Feil and Mr. Leandro Ferreira, Co-Directors of the Forum.
[GSWF] Brazil had a country-level SWF, the Fundo Soberano de Brasil (FSB). Can you please explain what happened with FSB and whether it will be relived?
[FFSB] FSB was implemented in 2008 out of fiscal budgets, rather than with oil revenues, and it was discontinued in 2019. There is another SWF that was set up with the pre-salt oil in 2010 (“Fundo Social”), to finance the education and health systems, but it is yet to be implemented. Now that the PT (the Worker’s Party) has regained power, we expect the debate of a Sovereign Wealth Fund at federal level to resurface.
[GSWF] Why have SWFs being set up in Niterói, Maricá, Ilhabela and ES; and not in other places? Are these rich in resources?
[FFSB] These cities and states are very rich in natural resources, indeed, and they are strongly supported by state-owned development banks. Because of the revenues from pre-salt oil, there are various municipalities across Brazil (Rio de Janeiro, Rio Grande do Sul, etc.) with significant wealth, and we have been pro-active in supporting them with the right tools and with the institutional framework.
[GSWF] FFSB is a JV between the Universidade Federal Fluminense and Jain Family Institute – how did this come about?
[FFSB] Jain Family Institute was seeking new projects to be involved in and started researching about basic income n Maricá, RJ. As part of that visit we scheduled visits to the people running the SWFs of Maricá and Nitéroi in Rio de Janeiro state. From there, the rest of the funds in Espírito Santo, São Paulo and Minas Gerais followed. As a public university, we are very close to authorities, and we at UFF would like to become the go-to place when it comes to best practices. We aim to become an independent and sustainable think-that.
[GSWF] Two cities of Minas Gerais (Congonhas and Conceição do Mato Dentro) may be next in joining the FFSB. Who else?
[FFSB] Dealing with states and municipalities that are rich in mining revenues, such as Minas Gerais or Pará, is much more challenging, because the mines are inside the cities and affect a lot of people and jobs. Mining happens all around the country, and they are part of the national association of municipalities with mining resources. The potential is huge if they use the revenues in the right way.
[GSWF] FFSB’s aggregate AuM is US$ 1.7 billion. What is this money invested in and is this managed internally or externally?
[FFSB] For now, most of the portfolios are allocated into the financial markets including government bonds. However, they are looking into investing in Share Investment Fund (“FIP”) and in the future, it is expected that they will be able to invest in domestic, social projects.
[GSWF] SOIs have invested over US$ 40 billion in Brazil since 2010. Will FFSB act as a catalyzer for further FDI?
[FFSB] We are open to collaborate with international SWFs and to co-invest in Brazilian projects and assets. For example, the Espírito Santo fund (FUNSES) is managed quite professionally and has attracted private capital (roughly 1 to 1 BRL) for their projects. We also work with development institutions such as WB and IADB, and with sustainable funds such as Climate Fund and Amazon Fund.
[GSWF] In terms of human capital, has each Sovereign Fund formed their own teams?
[FFSB] These municipalities are usually very small and do not have enough institutional capacities. But they are sometimes supported by civil servants at federal level and we are working on the governance level to set up appropriate board and committees. Additionally, we at UFF are planning to do an MBA in investment, sustainability, capital formation, and public administration, in conjunction with the Maricá fund (FSM). If it works well, we may take it to the rest of our members, and we are also doing webinars in a monthly basis.
[GSWF] Personally, what are your goals for the next three to five years?
(Fernanda) I am very keen to see the sovereign funds working out and also for them to be able to co-finance the energy transition.
(Leandro) Being part of this innovative project is very exciting and would like to expand the number of funds associated to FFSB.