Brazilian state-run development bank BNDES will receive at least 45 billion Real or 27 billion US dollars from the government to extend its program of low-cost loans for supporting company investments in capital goods, local media reported this week.
BNDES has been a key driver of business credit in Brazil since private sector loans dried up in 2008, but its continued use of subsidized loans has drawn criticism that it is contributing to the overheating of the economy.
It lent a record 168.4 billion Real (100.8 billion USD) last year, 23% more than the previous record in 2009. The 45 billion Real figure reported by the Folha de S. Paulo and Brasil Economico newspapers, is close to the 50 billion Real the government has said it will cut from the budget this year as it attempts to cool the economy and ease price pressures.
The total amount has still not been decided, but will not be more than 80 billion Real (48 billion USD), Brasil Economico reported.
Most of last year's surge in lending by BNDES was due to a 24.7 billion Real transaction with state-controlled Petrobras linked to the oil giant's massive 70 billion US dollars capitalization in September.
But the bank has been the leading force behind many of Brazil's biggest corporate takeovers in recent months, funding so-called national champions seeking a greater global role. The bank's subsidized loans to Brazilian businesses have also drawn criticism from private-sector rivals that complain of unfair competition.
About 47% of the loans in 2010 went to the industrial sector, with another 31% going into infrastructure projects, BNDES said in an e-mailed statement.
The bank agreed to lend billions of Real to companies such as Mercedes-Benz, the truck making unit of Daimler AG and toll road operator Ecorodovias. BNDES has also become the main funding source for major hydroelectric power projects and agreed to lend up to 20 billion Real for a high-speed bullet train linking Rio de Janeiro and Sao Paulo.
BNDES also helped finance the beef and dairy industries, indirectly helping leading companies of the sector make major acquisitions over seas to consolidate Brazil’s predominance in such areas.
The bank approved 200.7 billion Real in credit lines in 2010, while loan demand from companies reached 255.9 billion Real. Not all of the credit lines are paid out the same year they are approved.
BNDES President Luciano Coutinho said in December he wants to reduce the bank's role in Brazil's economy to allow for broader participation by other firms. BNDES is responsible for 20 to 25% of investments in the country and Coutinho said it would be ideal to bring that down to 10 to 12%.