MercoPress. South Atlantic News Agency

Development bank activity shows Brazilian economy slowing down

President Luciano Coutinho said loan disbursements are below target

Loan disbursements at Brazil's state development bank BNDES will miss their initial target for the year, reflecting a rapid economic slowdown in Latin America's largest economy, the lender's top executive said on Monday.

The Rio de Janeiro-based bank will likely lend 140 billion Reais (83 billion dollars) to 145 billion Reais, below the original estimate that put lending at year-end between 145 billion and 147 billion Reais, bank President Luciano Coutinho said at a news conference.

If confirmed, the drop in disbursements would result in the first annual decline since 2008, providing a clear sign Brazil’s lending boom has moderated. Disbursements slumped 22% in the 12 months ended in September to a total of 132.23 billion Reais (78 billion dollars), BNDES said earlier.

The bank, often described by the government as the only major long-term lender in Brazil, doled out less credit after industrial companies reworked or cancelled requests for new loans.

“The pace at which lending is growing indicates that disbursements could come below our original guidance,” Coutinho told reporters in Rio de Janeiro.

His warning underscores the speed at which Brazil's economy is slowing down, enhancing BNDES' efforts earlier this year to withdraw part of the emergency credit lines it extended in the aftermath of the global financial crisis of 2008-2009.

The economy, which last year expanded at 7.5% -- the fastest growth in 24 years, -- is unlikely to grow more than 3% this year, some analysts said.

Credit to the largest companies dropped 34% in the 12 months ending on September 30, while credit to industrial companies slumped 47% in the same period, BNDES said. The latter represented about one-third of total credit disbursements in the period, worth a total of 42.3 billion Reais.

Disbursements to small- and mid-sized firms rose a meagre 2%, while lending to the smallest companies gained 25% in the period.

The numbers accompany signs that central bank interest-rate hikes and credit curbs in the first half of the year finally put the brakes on the nation's torrid credit expansion.

The central bank reversed the course of its policy late in August by slashing rates for the first time in two years in order to cushion Latin America's largest economy against the impact of a slowdown in the world's richest nations.

The drop also reflected a high base of comparison, BNDES said. In the first nine months of this year, lending fell 28% to 91.82 billion Reais, the bank added.