Abu Dhabi Investment Group has announced plans to invest more than $100 billion in Brazil, focusing on sectors such as infrastructure, clean energy, oil and gas, and agriculture, amid growing ties between the UAE and the South American nation.
The commitment was announced during a meeting between Brazilian President Luiz Inacio Lula da Silva and ADIG chief executive Zayed bin Aweidha in Brasilia, the company said in a statement on Friday.
The co-operation between the Brazilian government and ADIG will look at mergers in sectors such as technology and aviation, as well as automotive manufacturing – which will include the acquisition of an existing facility – and finance, including the establishment of a dedicated bank.
Key investment areas include restoration of degraded pasture, urban infrastructure, industrial development and sustainable mobility. The deals will extend to agriculture, with plans to boost food security across 400,000 square kilometres using advanced technologies to optimise supply chains and reduce waste, ADIG said.
Mr Aweidha described the partnership as a “cornerstone for energy security and sustainable economic growth” which will look at clean energy initiatives such as solar and wind projects to move towards a low-carbon economy.
Developing key initiatives outlined at this month's G20 Summit in Rio de Janeiro was discussed at the meeting. Sheikh Khaled bin Mohamed, Crown Prince of Abu Dhabi, was in Brazil to represent the UAE at the G20 Summit, where ADIG unveiled infrastructure initiatives aimed at boosting development in emerging economies.
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“Our efforts span the financing of smart transportation systems, clean water networks and green infrastructure, alongside driving digital transformation and modern technological advancements,” Mr Aweidha said.
ADIG also plans to finance the construction of alternative housing for informal settlements, including model villages to relocate slum residents, with the goal of enhancing productivity and raising living standards.
The UAE, the Arab world’s second-largest economy, aims to boost trade and economic relations with countries around the globe to attract more investment and diversify its economy.
Brazil is one of the UAE's top trading partners in Latin America and ranks second only to the US among its most important trading partners in the Americas. The Emirates’ non-oil trade with Brazil reached $4.3 billion in 2022, an annual growth of 32 per cent, according to figures from the UAE's Ministry of Economy.
Last year, the UAE was the 28th-largest destination for Brazilian products. By the first half of this year, it moved up to the 13th position on the back of a 74 per cent increase in Brazilian exports to the Emirati market. At least 40 Brazilian companies operate in the UAE.
The two countries currently collaborate in industry, transport, shipping, storage, infrastructure, construction, port management, energy, mining, banking and finance, and property.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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