Monday, 26th March 2012 by Rachel Hall

Brazil, Nicaragua and Panama have been ranked as offering the most attractive environments for climate-related investments in Latin America, according to a new report developed by the Inter-American Development Bank (IADB) and Bloomberg, and the countries’ environmental lawyers say their renewable energy industries are set to keep on growing.

The Climatescope 2012 report, profiled by the IADB’s Multilateral Investment Fund and Bloomberg New Energy Finance, a clean energy market researcher, profiles 26 countries in Latin America and the Caribbean, evaluating their ability to attract capital for low-carbon energy sources and build a greener economy. Countries were ranked based on four parameters: enabling framework; clean energy investments and low carbon financing; low-carbon business and clean energy value chains; and greenhouse gas management activities.

Machado, Meyer, Sendacz e Opice Advogados partner Ana Karina Esteves de Souza says that the reason that Brazil is such an attractive market for clean energy investments is because, “despite the significant growth over the past few years, it continues to be an incipient market, with much potential for growth and development.” De Souza says that although some regions, for instance Rio Grande do Norte, have had significant development, other regions remain unexplored.

She also points to the financing granted by the Brazilian development bank (BNDES) as another positive attribute, as well as the stable regulatory framework with yearly auctions coordinated by [Brazil′s national energy agency] ANEEL, which have “clear cut rules and a simple auctioning procedure”.

The environmental team at Veirano Advogados, composed of partner Ana Luci Limonta Esteves Grizzi says that the increasing power consumption in the country makes Brazil a promising place for investments in this area. “The rules of the game are clear, there are plenty or renewable sources of power and there is increasing demand for power in Brazil,” says Grizzi, who predicts that investment in renewables, particularly wind and solar power, will remain a strong trend for the coming years.

Grizzi adds that in addition to Brazil’s renewable energy sources, including water, wind, sun and biomass, the country boasts “a regulatory framework that, except for changes passed in 2004 regarding the procurement of power by distributors, has been stable since the mid-nineties.”

Another new development highlighted by Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados partner Lina Pimentel is a regulation recently introduced on environmental and renewable energy, which provides tax benefits and introduces a national fund aimed at combating climate change. The fund is made up of a proportion of the revenue from the country’s oil and gas production in Brazil, which will be used to invest in efficient transportation and equipment; renewable energy; energy generation from waste; and the sustainable use of wood. Pimentel adds that the new policies have even proven a fruitful source of work, with clients turning to the firm to inquire about the economic impacts and benefits arising from them.

As far as the future is concerned, Grizzi lists four reasons behind why she believes that the Brazilian clean energy market looks set to grow over the next few years. Firstly, she points out the increasing evidence of negative environmental impacts derived from non-renewable sources; secondly due to environmental liability rules, banks are increasingly considering the environmental risks of providing credit to non-renewable projects; thirdly, the increasing global rules on climate change; and finally the fact that the licensing of renewable energy projects is becoming simpler and faster.

Grizzi cautions, however, that renewable sources “may face hard competition from natural gas – from the newfound pre-salt offshore oil fields – thermoelectric generation, from big amazon hydroelectric projects and nuclear plants the government intends to build, which may disrupt prices.”

But De Souza remains positive, saying that she expects to see “a market that matures and that becomes more diversified”. This will include, among other things, offshore wind energy developments; sales of clean energy within the free market; development of wind farms and small hydroelectric plants in regions that have not yet been developed; as well as the development of the carbon credit market and solar power projects.

As far as legal work connected to the clean energy industry is concerned, De Souza says that: “Our growth in this area has been exponential. In 2009, we had a few clients interested in the incipient wind energy market, for example. In the last auctions, we represented more than half of the energy traded.”

Veirano Advogados has also found clean energy to be a fruitful source of M&A, regulatory, construction and financing work. “The power auctions scheduled for 2012 have driven an increase in M&A and equity transactions. In our São Paulo office alone, we are now involved in the acquisition of six wind farm projects,” says Grizzi.

Over in Panama, Arias & Muñoz partner Siaska Lorenzo, believes that part of the reason why Panama was ranked so highly is the concrete steps the government has taken towards boosting the country’s image as an attractive place to invest in clean energy. The country recently enacted new laws promoting the use of biofuels and wind energy projects, as well as introducing an official regulatory body which will support new concessionaries in clean energy investments.

“Panama has been a pioneer, sanctioning creative legal vehicles for multinational operations within its boundaries,” she says. “At the end of the road, to develop high quality environmental harm-free energy projects is our goal as a country. Currently there are more than 40 ongoing petitions for approval before our local authorities.”

Lorenzo adds that, in addition to the legal framework, Panama has promising natural conditions. “The country offers an adequate microclimate and land conditions for growing raw materials and structures for wind plantations for successful clean energy projects,” she says.

For Consortium - Taboada & Asociados partner José Evenor Taboada, Nicaragua’s strengths lie in its clean energy policies, new legislation promoting clean energy projects and green micro-credit availability. “Nicaragua offers a variety of benefits and incentives, among which are the tax exemptions, the availability of credit for financing of such projects, having about 10 organisations that provide different types of green financial credits, which makes it the strongest in Central America; all within a national framework and policy of modification of the energy matrix towards clean and renewable energy sources,” he says.

Taboada also views Nicaragua’s low production costs as a boon for the clean energy sector, with prices that he says fall well below comparable countries like Costa Rica. Another promising attribute of Nicaragua’s renewable energy industry is the focus on biomass projects, which he says are a “high potential” sector. “All four major sugar mills in Nicaragua are using the biomass generated from the remains of the sugar cane to produce electricity enough to satisfy their internal demand and to offer the surplus of several dozen megawatts to the national grid,” he says.

Taboada says that in addition to this, there are plenty of promising investment opportunities for the future, as Nicaragua only produces 48 per cent of its energy by renewable means. “This means that there is a wide margin of such matrix to be transformed into clean, renewable sources, mainly from hydropower, geothermal and wind, all of them natural resources which are abundant in Nicaragua and with high potential,” he says.

(Latin Lawyer 26.03.2012)

(Notícia na Íntegra)