The Brazilian economy is well placed to survive the current market turmoil, due partly to its strong domestic demand supported by increasing levels of employment and rising incomes, according to Luciano Coutinho, president of the Brazilian Development Bank (BNDES).
Coutinho made these comments during an address to the Institute of International Finance in Washington DC on October 11. Speaking to an audience of investors and bankers, he asserted that BNDES would not face any problems in terms of guaranteeing the financial resources needed to finance projects essential to Brazil’s growth.
He went on to call for multilaterals such as the IMF, Inter-American Development Bank and the World Bank to work together on efforts to support small nations facing a shortage of loans in the market.
Looking at the future of the Brazilian economy in 2009, he stated that the growth would be moderate in the coming 12 months before accelerating again.
His comments follow news that BNDES has secured a US$1bn loan from the Inter-American Development Bank (IADB) which would be used to support the expansion of micro, small and medium-sized companies in Brazil.
"This announcement reaffirms the long-term partnership between the IDB and BNDES, and it comes at an appropriate time when small firms are dealing with credit availability problems,” Coutinho comments.
The loan has a 20-year maturity with a four-year grace period and it is the third loan to be approved under a US$3bn conditional credit line for investment projects launched in 2005. The first two loans resulted in 54,686 credit operations, with an average value of US$65,997 each.
Despite market turbulence, BNDES anticipates loan demand in Brazil to be strong, with its projected budget for 2009 at R$90bn (US$39bn).
Loans of close to R$3bn from multilaterals and international agencies are being closed now for 2009. BNDES may tap non-governmental funding such as bonds in local or external markets, as a “complementary source” of funding, but it still has a relatively limited presence in external capital markets.
BNDES will also not be tapping foreign capital markets before the end of 2008, having already completed its plans for the year by accessing US dollar capital markets. However the bank has stated that if required it will use locally sourced short-term debt as a form of bridge financing.
Historically non-government funding sources have only been a complementary part of BNDES’ budget. As of June 30 this year, outstanding debt from market sources, both local and international totalled R$4.64bn, representing 2.4% of BNDES’s funding sources.
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