Singapore’s sovereign wealth fund GIC this week struck its second significant deal in Brazil this month with a BRL1.2 billion (US$240 million) retail and logistics venture with Barzel Properties, continuing a quiet rise in investment by the SWF community in the South American nation.

The partners acquired five distribution centers and four retail stores through a sale-leaseback contract with Carrefour Brazil Group, which has a 20-year lease on the properties.

Adam Gallistel, GIC’s Head of Americas Real Estate, said, “In Brazil, we have been continuously exploring sale-leaseback opportunities underpinned by long-term contracts and companies with solid and growing operations, such as Carrefour Brazil Group.”

Earlier this month, GIC joined a consortium also including GQG Partners LLC, Zimmer Partners, SPX Capital and Radar that acquired a 20% stake in utility company Companhia Paranaense de Energia (Copel) from the government of Parana state for BRL5.2 billion (US$1.1 billion). The deal is among several privatizations that have attracted foreign investor interest, including state-owned investors.

In April, GIC signed a US$472 million agreement with Spanish energy group Iberdrola to develop a 1,865km electricity transmission network in Brazil. According to Reuters, they also agreed to joint participation in future tenders for electricity transmission assets in Brazil, with GIC as Iberdrola's preferred partner for future auctions.

So far, 2023 is the biggest year for GIC investment in Brazil since 2016, when it joined a consortium led by Canada's Brookfield Asset Management to acquire a 90% stake in Petrobras’ natural gas pipeline unit, Nova Transportadora do Sudeste, for US$5.2 billion.

With more than US$2.6 billion committed in direct investment in Brazil, GIC still has a long way to catch up with Mubadala’s eye-watering US$5.6 billion. The Abu Dhabi investor is the biggest sovereign wealth backer of the Brazilian economy. In April, it supported a major leap forward in aviation by funding a US$2.5 billion project to build a sustainable fuel plant in Brazil. The plant in Bahia state will be managed by Mubadala Capital subsidiary Acelen and start construction in Q1 2024 with production commencing in Q1 2026. The fuel is based on hydrotreated vegetable oil and is set to reduce carbon emissions by up to 80%. It will be based at the Mataripe Refinery which currently produces petrochemicals.

Mubadala is one of Brazil’s most active inward investors, focusing notably on distressed assets. In the past three years, it invested in O&G (the RLAM refinery), Infrastructure (MetrôRio), Renewables (Renova) and Real Estate (Medical Campus), and raised US$322 million for country-specific fund BSOF I.

Last year, Mubadala said it was ready to spend US$3 billion, in addition to the US$5 billion it has already deployed. It is followed by CDPQ, with US$4.5 billion, and CPP, with US$2.7 billion, . The Canadian funds have offices in Sao Paulo, very close to Singaporeans GIC and Temasek, which were the first ones to open in 2014 and 2008, respectively.

Global SWF analysis finds that sovereign wealth funds and public pension funds have invested nearly US$28 billion in Brazil from 2016 to date with real assets comprising nearly two-thirds of the total SOI investment in Brazil. More than 54% of the SOI investment is in infrastructure assets while real estate represents 10.7% of capital deployed. Energy and natural resources are also an important target, representing 19.5% - thanks to both Mubadala’s aviation fuel project and the acquisition of a stake in nickel and copper producer Vale Basic Metals by Saudi Arabia’s Public Investment Fund (PIF), agreed this year.

In the real estate sector, trends point to increasing interest in logistics, following a global trend that has been stimulated by changes in distribution networks in response to a rise in e-commerce and home delivery.

In terms of sub-sectors within infrastructure, oil and gas sector dominates (41.0%) with chunky investments in midstream and downstream assets, notably the Nova Transportadora do Sudeste (BCI, CIC and GIC) and the Transportadora Associada de Gás (CDPQ) pipelines and the Mataripe refinery (Mubadala). Opportunities to invest in oil and gas infrastructure are also likely to dry up as there is only a limited number of oil and gas assets. Other areas of interest are water and sanitation utility companies, renewables, and roads and transport, which represent 6.2%, 4.5% and 2.7% of investment since 2016, respectively.

Related funds GIC Mubadala