When people think about emerging market credit, they often assume the core problem is risk. In practice, the problem is rarely credit quality itself. It is fragmentation.

Emerging markets generate massive volumes of short-duration, self-liquidating receivables that finance everyday economic activity (payments, healthcare, logistics, agribusiness, retail, and services). These assets are backed by real transactions and predictable cash flows. Yet they remain largely inaccessible to global investors. Regulatory complexity, FX friction, enforcement opacity, and operational fragmentation trap receivables inside local systems. The result is structural inefficiency: businesses overpay for working capital, while global capital struggles to access reliable, asset-backed yield.

We start in Brazil because this fragmentation is unusually visible, well-documented, and, critically, addressable.

Brazil is the largest economy in Latin America, with a GDP of approximately US$2.3 trillion and a population of over 210 million. It is not an early-stage credit market. Private sector credit represents roughly 75% of GDP, far above the Latin American average of ~45%, yet still well below developed markets such as the United States, where credit exceeds 200% of GDP.

This gap matters. It signals structural headroom for credit expansion, particularly outside traditional bank balance sheets and away from long-duration consumer credit. The fastest-growing segments in Brazil today are asset-backed, short-duration instruments, especially receivables financing. Among investment vehicles, FIDCs—Brazil’s institutional-grade receivables funds—have been the fastest-growing asset class, now exceeding US$240 billion in assets.

On an annual basis, Brazil intermediates approximately US$371 billion in receivables-backed credit. This flow already finances a large share of the real economy. The issue is not whether the assets exist. It is how efficiently capital reaches them.

Brazil is known for having some of the highest banking spreads in the world. For small and mid-sized businesses, working capital is often prohibitively expensive. At first glance, this might suggest elevated credit risk. The data tells a different story.

Banking non-performing loan ratios in Brazil are below both the Latin American and global averages. In receivables financing, default rates are even lower. According to Brazilian Central Bank data, the average default rate on receivables advancement in 2025 was approximately 0.66%, across a market exceeding US$370 billion in annual volume.

The disconnect is structural. High spreads are driven less by risk and more by banking concentration, funding costs, and legal friction. The top four banks control close to 58% of all credit operations in the country. SMEs have limited alternatives, even when underlying assets are well protected and highly liquid.

This creates an unusual arbitrage: high spreads on assets with near investment-grade behavior. Infrastructure, not leverage or aggressive underwriting, is the missing layer.

Brazil’s regulatory environment is often misunderstood. It is strict, but it is also explicit and infrastructure-oriented.

Over the past decade, regulators have pursued a consistent strategy: reduce concentration, increase transparency, and enable non-bank intermediation while maintaining strong investor protections. Key reforms include centralized receivables registries to prevent double-pledging, clearer assignment and priority rules, and modernized securitization frameworks.

CVM Resolution 175 modernized the fund industry, enabling modular fund structures with clearer segregation of assets and liabilities. CMN Resolution 3,952 strengthened the legal certainty of credit assignment outside bank balance sheets. CVM Resolution 88 brought digital issuance and tokenization inside a regulated perimeter rather than leaving it in a gray zone.

Rather than relying on regulatory arbitrage, Brazil has chosen rule-based reform. This makes the system complex, but legible. For institutional capital, legibility matters more than simplicity.

We do not see Brazil as a special case. We see it as a proving ground.

It combines scale, regulatory maturity, operational depth, and real economic relevance in a way few emerging markets do. There are no hard capital controls on repatriation, FX markets are deep and liquid, and there is an established ecosystem of originators, servicers, fiduciary agents, and legal specialists accustomed to institutional structures.

If a conservative, regulated, institution-grade credit infrastructure can work in Brazil—under scrutiny, through cycles, and at scale—it can be adapted to other emerging markets where receivables play a similar economic role but lack efficient access to global capital.

Brazil is the entry point, not the endpoint. It is where the fragmentation is most visible, the data is most available, and the infrastructure logic can be proven before expanding globally.

That is why we start here.

When people think about emerging market credit, they often assume the core problem is risk. In practice, the problem is rarely credit quality itself. It is fragmentation.

Emerging markets generate massive volumes of short-duration, self-liquidating receivables that finance everyday economic activity (payments, healthcare, logistics, agribusiness, retail, and services). These assets are backed by real transactions and predictable cash flows. Yet they remain largely inaccessible to global investors. Regulatory complexity, FX friction, enforcement opacity, and operational fragmentation trap receivables inside local systems. The result is structural inefficiency: businesses overpay for working capital, while global capital struggles to access reliable, asset-backed yield.

We start in Brazil because this fragmentation is unusually visible, well-documented, and, critically, addressable.

Brazil is the largest economy in Latin America, with a GDP of approximately US$2.3 trillion and a population of over 210 million. It is not an early-stage credit market. Private sector credit represents roughly 75% of GDP, far above the Latin American average of ~45%, yet still well below developed markets such as the United States, where credit exceeds 200% of GDP.

This gap matters. It signals structural headroom for credit expansion, particularly outside traditional bank balance sheets and away from long-duration consumer credit. The fastest-growing segments in Brazil today are asset-backed, short-duration instruments, especially receivables financing. Among investment vehicles, FIDCs—Brazil’s institutional-grade receivables funds—have been the fastest-growing asset class, now exceeding US$240 billion in assets.

On an annual basis, Brazil intermediates approximately US$371 billion in receivables-backed credit. This flow already finances a large share of the real economy. The issue is not whether the assets exist. It is how efficiently capital reaches them.

Brazil is known for having some of the highest banking spreads in the world. For small and mid-sized businesses, working capital is often prohibitively expensive. At first glance, this might suggest elevated credit risk. The data tells a different story.

Banking non-performing loan ratios in Brazil are below both the Latin American and global averages. In receivables financing, default rates are even lower. According to Brazilian Central Bank data, the average default rate on receivables advancement in 2025 was approximately 0.66%, across a market exceeding US$370 billion in annual volume.

The disconnect is structural. High spreads are driven less by risk and more by banking concentration, funding costs, and legal friction. The top four banks control close to 58% of all credit operations in the country. SMEs have limited alternatives, even when underlying assets are well protected and highly liquid.

This creates an unusual arbitrage: high spreads on assets with near investment-grade behavior. Infrastructure, not leverage or aggressive underwriting, is the missing layer.

Brazil’s regulatory environment is often misunderstood. It is strict, but it is also explicit and infrastructure-oriented.

Over the past decade, regulators have pursued a consistent strategy: reduce concentration, increase transparency, and enable non-bank intermediation while maintaining strong investor protections. Key reforms include centralized receivables registries to prevent double-pledging, clearer assignment and priority rules, and modernized securitization frameworks.

CVM Resolution 175 modernized the fund industry, enabling modular fund structures with clearer segregation of assets and liabilities. CMN Resolution 3,952 strengthened the legal certainty of credit assignment outside bank balance sheets. CVM Resolution 88 brought digital issuance and tokenization inside a regulated perimeter rather than leaving it in a gray zone.

Rather than relying on regulatory arbitrage, Brazil has chosen rule-based reform. This makes the system complex, but legible. For institutional capital, legibility matters more than simplicity.

We do not see Brazil as a special case. We see it as a proving ground.

It combines scale, regulatory maturity, operational depth, and real economic relevance in a way few emerging markets do. There are no hard capital controls on repatriation, FX markets are deep and liquid, and there is an established ecosystem of originators, servicers, fiduciary agents, and legal specialists accustomed to institutional structures.

If a conservative, regulated, institution-grade credit infrastructure can work in Brazil—under scrutiny, through cycles, and at scale—it can be adapted to other emerging markets where receivables play a similar economic role but lack efficient access to global capital.

Brazil is the entry point, not the endpoint. It is where the fragmentation is most visible, the data is most available, and the infrastructure logic can be proven before expanding globally.

That is why we start here.