MercoPress. South Atlantic News Agency

Brazil plans to further fund the Development bank anticipating credit crunch

Arno Augustin said the sum under consideration is 10bn Reais

Brazil is considering injecting more funds to the National Development bank, BNDES for the fifth year running in anticipation of a possible shortage of long term credit in the economy, said Arno Augustin, Secretary of the Treasury.

“The national treasury which is the main shareholder at BNDES will probably inject less than the 55 billion Reais (31bn dollars) committed in 2011” said Augustin in an interview with the financial newspaper Valor Economico.

The decision will come once the debate on the budget and possible adjustments come to an end added the minister.

The Brazilian government has funded BNDES with over 283 billion Reais since the beginning of the 2008 financial crisis fearing that restrictions in money markets could have an impact on local corporations’ access to credit.

However critics argue that such a policy of growing funding of BNDES is actually cutting back operational chances for private banking.

“A smaller funding should help create conditions for the private sector to continue financing long term investment in Brazil”, said Augustin who anticipated that a possible sum could be 10bn Reais which is a remnant from last year’s program.

BNDES is considered the main source of long term credit for Brazilian companies and according to Valor, some government officials are pressing for a new round of funding given the “apparent difficulty” faced by commercial banks on giving fresh credits.

The Treasury said Augustin, will obtain the necessary financing to capitalize BNDES by floating new debt.