SAO PAULO (Reuters) - Foreign debt financing by Brazilian issuers is surging again, reaching a three-year high in 2024, as local companies seek to refinance existing obligations or make new investments.

In the first nine months of the year, companies, financial institutions and the federal government issued a total of $17.6 billion worth in foreign bonds, compared with $15.5 billion in the full year of 2023, according to the Brazilian Financial and Capital Markets Association (Anbima). 

The biggest issuer so far in the year was the National Treasury, with $6.5 billion in bonds, including a $2 billion offer of sustainable debt. Issuances by the government serve as benchmarks for private offers, according to bankers.

Brazilian companies, meanwhile, have increased their foreign borrowings in recent months, attracted by lower rates as well as a larger pool of long-term investors abroad than at home.

Together, financial institutions and companies have raised $11.1 billion in international bonds as of September, compared with $11.3 billion in the full year of 2023, according to Anbima.

Local companies are often able to issue debt at longer maturities outside of Brazil, according to Carlos Moura, chief financial and investor relations officer at fuel company Raízen, which also tapped the green bond market twice this year, raising a total of $2.5 billion. Both offers were oversubscribed. 

Offering green debt securities can substantially increase demand, according to specialists, but non-environmental  bonds issued by Brazilian companies with high credit ratings have also found good appetite from investors in 2024. 

Large primary materials producers, such as petrochemical producer Braskem SA ( BAK ) and iron-ore miner Vale SA ( VALE ), have equally taken advantage of their access to foreign debt financing.

"A lot of investor cash was built during the rising rate environment and appetite for emerging markets is super strong," said Ian Linnell, president of Fitch Ratings. 

"If you look at the BRICS, Russia is persona non grata and China has significant domestic economic problems. By contrast, India has a good growth story and Brazil, while no longer investment grade, has a solid double B credit and a established policy framework," he added. BRICS is an intergovernmental organization comprising several countries, among them Brazil, Russia, India, China and South Africa.

While clearly growing, foreign debt offers by local issuers have not reached the peak of 2020 and 2021. In 2020, Brazilian debt offers in the foreign market surpassed $25 billion, according to Anbima. Investors at that time had a lot of money to spend and issuers took advantage of the low rates, according to bankers.

Now, after holding borrowing costs, the U.S. Federal Reserve has again started cutting rates, potentially leading more firms to seek the U.S. market, according to Matthew Poulter at global law firm Linklaters, which has been advising companies seeking to issue debt outside of Brazil.

"The advantage we have here is being able to count on the foreign market in a complementary way to what we have in the local market," said Guilherme Maranhão, head of the capital markets forum at Anbima.