UAE entities, especially sovereign wealth funds (SWFs), have a significant opportunity to address Brazil’s pressing infrastructure needs while fostering mutual economic growth, according to Luis Fernando Eleutério Lopes, partner and chief economist at Patria Investments. The diplomatic relationship between Brazil and the UAE, which began fifty years ago, has evolved into a robust partnership, characterized by shared economic ambitions and innovation.

Merchandise trade between the two nations has increased at an impressive annual rate of 14 percent over the past 26 years, reaching $6 billion in the 12 months ending October 2024. Despite this growth, this figure represents only 1 percent of each country’s total foreign commerce, indicating a vast potential for further economic collaboration. Investment in infrastructure development stands out as a key area where both countries can strengthen their ties.

Brazil’s urgent infrastructure gaps span various sectors, including power generation, logistics, and data centers. The World Bank has highlighted the critical role of modern infrastructure in creating better job opportunities for the Brazilian workforce. The World Economic Forum’s January 2024 report indicates that Brazil’s infrastructure ranks in the middle range globally, with a score of four on a scale of one to seven, where seven signifies optimal performance.

Middle Eastern investments in Brazilian infrastructure have begun to gain traction. For instance, Saudi Arabia’s Public Investment Fund (PIF) recently invested in Brazil’s transportation infrastructure, participating in government auctions for toll-road concessions. Such initiatives could pave the way for UAE investors, particularly SWFs, to engage in similar profitable ventures.

In Latin America, where Brazil is the largest economy, investment opportunities amount to approximately $90 billion in infrastructure projects. These include toll-road concessions in Brazil and Colombia, water desalination initiatives in Chile and Peru, and sanitation asset privatization in Brazil. Collaborating with specialized partners will be crucial for Middle Eastern investors to navigate the complexities of these emerging markets effectively.

Investors can also mitigate concerns regarding sub-national risks, as infrastructure assets often feature long-term contracts and inflation indexation, ensuring stability. The experience from previous investments, like those from PIF in toll roads with contracts spanning 20 to 30 years, illustrates the potential for reliable returns.

Both nations can benefit from a two-way investment approach, where Brazilian investors can also channel their funds into key sectors in the UAE. As they look to the future, the UAE and Brazil have ample opportunities to deepen their collaboration in sectors like infrastructure, aiming for a mutually prosperous relationship over the next fifty years.