Mitigating Foreign Exchange Risk in Infrastructure Financing Under Public-Private Partnerships: A Case Study of Brazil
摘要
Cross-border energy trading has several benefits for both importers and exporters. However, cash flows are impacted by this uncertainty, because of pricing differences across nations between the exchange of energy and its payments. Currency risks affect businesses that deal internationally in three main areas: transactional, economic, and translational vulnerability. The purpose of this study is to estimate how much local currency will be needed in 30 days to pay USD energy purchases. The preliminary research highlights the limited bargaining leverage of importers by highlighting their increased vulnerability to currency depreciations versus the US dollar. Exchange rate risks are expected to be transmitted, and the risks for intermediary nations are ignored. Techniques like Monte Carlo simulations are used to model different exposure situations and give an overall picture.