Investors regret being excluded from Biden’s infrastructure plan – 12/04/2021 – Market

Finance officials lament that they have been excluded from plans to support America’s dilapidated infrastructure, while the Biden government promotes an approach to taxation and spending on construction projects.

President Joe Biden’s “US Jobs Plan”, revealed last month, calls for $ 2 trillion in investments in roads, power grids and other basic infrastructure.

At the same time, the White House introduced corporate tax reforms that it said would generate enough money to pay for the wave of investment in 15 years.

This has disappointed some investors and fund managers, who previously expected public-private partnerships to be a lucrative funding opportunity.

“I would love to invest this money in infrastructure projects,” said Christopher Ailman, director of investments at Calstrs, a retirement system that pays the pensions of California teachers.

“There are huge reserves of private capital on hold”

The $ 290 billion fund has had sporadic conversations with the US Treasury about investing in infrastructure projects since the Obama administration, Ailman said. “Many long-term investors see infrastructure as a source of stable long-term returns,” he said.

Infrastructure private equity vehicles had raised $ 655 billion in assets as of last June, according to Preqin data – enough to pay for billions of dollars in investments, when debt financing is added.

“There are huge pools of private capital on hold,” said Larry Fink, managing director of BlackRock. “And a big problem is the lack of infrastructure projects for investors to invest.”

Donald Trump hoped to solve the problem, promising in his inaugural address “to build new roads and highways and bridges and airports and tunnels and railroads across our wonderful country.”

These ambitions prompted the Saudi government to commit around $ 20 billion to an infrastructure-focused investment fund in the United States.

But Trump’s construction agenda did not materialize and asset management group Blackstone, which invests Saudi money with capital from other investors, had largely focused on trying to buy existing assets, such as ports, railways and toll roads, instead of pouring concrete into new locations.

While Biden’s proposal reignites some of his predecessor’s unrealized ambitions, it does not envision a role for private investors hoping to get behind the wheel.

“This is a very traditional plan of the type that says the government is spending on infrastructure,” said a lobbyist who represents private equity firms in Congress.

“It shows that President Biden really is a politician created in the 1970s and 1980s. It certainly sounds like the old ‘government finance’ approach. That was how the infrastructure was designed at the time. ”

Unlike the federal government, which pays a lower interest rate on its debt than almost all other borrowers, private sector infrastructure operators must have commercial rates of return, a cost that ends up falling on the government. user of essential services.

“If the Biden government wants the lowest funding costs, it will fund projects at the federal level,” Fink said.

But some leaders say private sector involvement can impose business discipline and generate savings elsewhere.

Others hope Biden can be convinced to sell assets that are currently publicly owned, allowing investors to have a return on existing infrastructure while leaving risky construction work to the public sector.

“The world has changed a lot over the past 80 years,” said a senior executive at a company that has invested billions of dollars in energy and transportation, expressing general frustration at Biden’s slowness to embrace the participation of the private sector in its public investment program.

“A whole infrastructure industry has been born. And there are ways for the government to partner with private partners to accelerate, scale up and increase the efficiency of what they do.”

Originally translated from English by Luiz Roberto M. Gonçalves

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