Brazil industry group bashes export support bureaucracy
Brazil’s export finance and guarantee system needs to be simplified in order to bolster the country’s trade, according to the National Industry Confederation (CNI).
In a CNI report, international negotiations specialist Fabrízio Panzini explains that processing times for both financing lines and export and investment guarantees need to be shortened, and access to export support for SMEs improved.
The organisation welcomes the fact that each US$1 provided by Proex, one of Brazil’s official export support programmes (operated by Banco do Brasil), generated about US$19 in export revenue in 2015 and 2016. Proex works by “equalising” interest rates, meaning it offers exporters loans at rates much lower than the double-digit numbers generally observed in Brazil.
Along with the other export financing scheme, BNDES Exim (operated by the country’s development bank), this is enough to meet demand, according to CNI.
However, when it comes to guarantees, the situation is very different, with limited instruments available and complex processes, Panzini adds. He explains that for transactions that require pre-export financing, there still isn’t an adequate response – which would include unconditional guarantees over bank finance, using capital markets and financing local costs.
“Exporters resent the limitation or absence of mechanisms used by their international competitors,” Panzini says.
The existing guarantee mechanism, SCE, is a complex and fragmented system requiring the direct involvement of the federal government, adds Eduardo Augusto Guimarães, an independent economist and consultant.
“The guarantee process is very slow and complicated. We won’t cut processing times if we don’t change the underlying institutional framework,” he says.
Additionally, private banks don’t get involved in export guarantees in Brazil, arguing that the cost-benefit is not worth it.
José Augusto de Castro, the president of Brazil’s foreign trade association (AEB), explains that existing regulations to increase access to export credit for SMEs are too limited, targeting only companies with an annual turnover of up to R$90mn (US$27mn) for transactions of less than US$1mn. “This is nothing,” he says. “At a time when we need to stimulate exports, companies don’t have enough access to guarantees.”
To remedy the situation, CNI suggests revising pre-export financing processes, encouraging commercial banks to do more medium and long-term export financing, reducing guarantee approval times and increasing the guarantee product portfolio, forming partnerships with other export credit agencies, and giving more autonomy to Banco do Brasil and BNDES to approve export financing and guarantees.take me back