Asian Infrastructure Investment Bank sees potential in Brazil – Valor International

Report on AIIB’s Role in Brazil’s Infrastructure Development and Sustainable Goals

Introduction

Jin Liqun, President of the Asian Infrastructure Investment Bank (AIIB), emphasizes Brazil’s potential to become a pivotal player in Latin America, akin to China’s role in Asia, through substantial investment in infrastructure. Historically, Brazil’s economy has been more aligned with distant partners such as the United States and China rather than regional integration.

Focus on Sustainable Development Goals (SDGs)

The AIIB’s initiatives in Brazil strongly align with several Sustainable Development Goals, particularly:

• SDG 7: Affordable and Clean Energy
• SDG 9: Industry, Innovation, and Infrastructure
• SDG 6: Clean Water and Sanitation
• SDG 13: Climate Action
• SDG 15: Life on Land (Biodiversity Protection)

Current Investments and Strategic Priorities

1. Energy Transition: AIIB prioritizes investments in Brazil’s energy transition, focusing on renewable energy and green finance to support sustainable development.
2. Infrastructure Development: Plans include logistics, integration infrastructure, water access, and efficient use of natural resources to foster regional connectivity and economic growth.
3. Climate Finance: In 2024, 67% of AIIB’s global investments were dedicated to climate finance, an increase from 60% in 2023, demonstrating the bank’s commitment to climate action.

Key Projects in Brazil

• Solar Energy Financing: A $100 million allocation to Sicredi, a cooperative bank, to finance small-scale solar energy systems for households and small to mid-sized businesses, with an additional $100 million expected from private investors.
• Renewable Energy and Infrastructure Loan: A $100 million loan in partnership with the Development Bank of Minas Gerais (BDMG) to support renewable energy and infrastructure projects.
• Environmental Risk Mitigation: A proposed $1 billion loan as part of a $3 billion package with the World Bank to address environmental risks following the 2024 floods in Rio Grande do Sul.
• Future Projects: Seven additional projects are under evaluation, including a transcontinental railway linking the Atlantic and Pacific oceans to enhance regional integration and economic resilience.

Brazil’s Role and Regional Integration

Brazil’s recent full membership since 2020 has limited its current share in AIIB’s portfolio, which stands at $450 million across four projects. However, the country’s strategic position, population, and natural resources offer significant potential to expand its role in the bank’s activities. President Lula’s administration prioritizes inclusive development, working closely with the private sector to maximize impact.

Financial Innovations and Local Currency Use

• AIIB advocates for the de-dollarization of development finance and increased use of local currencies to reduce borrowing costs and support domestic capital markets.
• Currently, approximately 15% of AIIB’s operations are denominated in local currencies, with plans to increase this share, benefiting especially the private sector.
• Despite this, the U.S. dollar is expected to remain the primary reserve currency for decades.

Governance and Multilateral Cooperation

Since its inception in January 2016, AIIB has grown to include 110 member states and positions itself as a multilateral institution rather than a Chinese bank. China holds 26.5% of voting power, followed by India, Russia, and Germany. European countries combined with Canada, Australia, and New Zealand hold effective veto power, ensuring balanced governance.

Conclusion

AIIB’s engagement with Brazil represents a strategic effort to promote sustainable infrastructure development aligned with the Sustainable Development Goals. By fostering energy transition, climate resilience, and regional integration, AIIB supports Brazil’s potential to lead Latin America towards inclusive and sustainable growth.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy – The article discusses investments in renewable energy, solar energy systems, and energy transition in Brazil.
2. SDG 9: Industry, Innovation, and Infrastructure – Infrastructure development such as logistics, integration infrastructure, and a proposed transcontinental railway are highlighted.
3. SDG 13: Climate Action – The focus on climate finance, environmental risk mitigation, and biodiversity protection connects to climate action.
4. SDG 6: Clean Water and Sanitation – Water access and efficient use of natural resources are mentioned as part of AIIB’s plans.
5. SDG 17: Partnerships for the Goals – The article emphasizes international cooperation, partnerships with local banks, and multilateral institutions.
6. SDG 8: Decent Work and Economic Growth – Support for small and mid-sized businesses and boosting domestic economies through infrastructure.

2. Specific Targets Under Those SDGs Identified

1. SDG 7 Targets:
   • 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • 7.a: Enhance international cooperation to facilitate access to clean energy research and technology.
2. SDG 9 Targets:
   • 9.1: Develop quality, reliable, sustainable, and resilient infrastructure.
   • 9.4: Upgrade infrastructure and retrofit industries to make them sustainable.
3. SDG 13 Targets:
   • 13.1: Strengthen resilience and adaptive capacity to climate-related hazards.
   • 13.2: Integrate climate change measures into policies and planning.
4. SDG 6 Targets:
   • 6.1: Achieve universal and equitable access to safe and affordable drinking water.
   • 6.4: Increase water-use efficiency across all sectors.
5. SDG 17 Targets:
   • 17.6: Enhance North-South, South-South and triangular regional and international cooperation on and access to science, technology and innovation.
   • 17.9: Enhance international support for implementing effective and targeted capacity-building.
6. SDG 8 Targets:
   • 8.3: Promote development-oriented policies that support productive activities and decent job creation.

3. Indicators Mentioned or Implied to Measure Progress

1. Renewable Energy Capacity: The financing of small-scale solar energy systems up to 1 megawatt indicates measurement of installed renewable energy capacity (related to SDG 7.2).
2. Climate Finance Share: The proportion of AIIB’s investments dedicated to climate finance (67% in 2024) is an indicator of financial flows supporting climate action (SDG 13.1 and 13.2).
3. Infrastructure Projects Financed: Number and value of infrastructure projects approved and financed (e.g., $450 million across four projects, $1 billion loan for environmental risk mitigation) serve as indicators for SDG 9 targets.
4. Access to Water and Resource Efficiency: While not quantified, plans for water access and efficient use of natural resources imply indicators related to water availability and usage efficiency (SDG 6.1 and 6.4).
5. Local Currency Financing Share: The share of AIIB operations denominated in local currencies (currently 15%) can be an indicator of financial system development and economic resilience (related to SDG 17.9).
6. Private Sector Engagement: Mobilization of private investment (e.g., additional $100 million from private investors) implies measurement of private sector involvement in sustainable development financing (SDG 17.3).

4. Table: SDGs, Targets and Indicators

Source: valorinternational.globo.com