Brazilian President Luiz Inácio Lula da Silva opened the seminar, saying that "this government needs to convince pension funds, including those abroad, to join forces to make socially correct investments." The cash-strapped government needs to attract foreign investment, especially in infrastructure projects, because Brazil is using low local savings to finance its $300 billion debt, giving it little leftover capital for making such investments.
Most of Mr. Harrigan's presentation was on how Brazilian companies could improve their investment potential and how the country could improve in CalPERS' ranking of emerging markets countries. Brazil placed low among 13 emerging markets countries where CalPERS already had investments. He also said that to increase that ranking, more Brazilian companies needed to follow accounting rule and corporate governance practices that make investments financially safer and easier to evaluate.
CalPERS reportedly has $228 million invested in 60 Brazilian companies, although only as a small minority shareholder in listed firms. During a May 27 private meeting with the heads of Previ, Petros and Funcef, the executives discussed the possibility of making less-diversified strategic investments in listed Brazilian companies, particularly in infrastructure-linked firms willing to share or relinquish control in exchange for new capital.
"CalPERS and (the Brazilian) pension fund CEOs discussed the possibility of becoming strategic investment partners in energy generation, water and waste treatment, and rail/water transport companies which are both socially responsible firms and which guarantee a minimum of 6%-a-year returns," said Wagner Pinheiro de Oliveira, Petros CEO. "(Mr.) Harrigan agreed with us that socially responsible firms generate better returns by not engaging in irresponsible or illegal practices which hurt their image with consumers and/or which cost them huge fines and legal fees."
Because Petros, with $6 billion in assets, already has made substantial strategic investments in several Brazilian energy companies, CalPERS and other non-Brazilian pension funds could share in that investment expertise through a partnership, said Mr. de Oliveira. "Such strategic investments partnerships don't need to be restricted to infrastructure firms, but could also include everything from food-processing companies to shoe-manufacturing firms, provided that they were socially responsible businesses," he said.