Banco do Brasil and Italian export credit agency Sace have signed a €100mn deal to spur imports by Brazilian small and medium-sized companies of Italian-made capital goods.
Under the agreement, Banco do Brasil will provide the €100mn funding and the cost is believed to be Libor plus between 150 basis points and 250bp.
Tenors go from two to five years. In case of default, Banco do Brasil will cover 40% and Sace will insure the remaining 60%. Loans range between US$50,000 and US$2.3mn, but bigger transactions can be evaluated too, Nilo Jos Panazzolo, foreign trade director at Banco do Brasil, points out.
The joint credit facility was signed during a visit by Italian minister Romano Prodi to Brazil in late March, 2007. During the negotiations, Italy’s Banco San Paolo and Promos, the foreign trade promotion organism of Italy’s Lombardia region, played an important part, Panazzolo says.
This is a plan to “boost the trade flow between Brazil and Italy,” says Panazzolo. Small and medium-sized companies often have difficulties to leverage larger credit limits in Brazil, he explains. The programme will entail Italian exports of capital goods and machinery of textiles, plastics, and other industries.
“Normally, financial sector limits are very limited in Brazil,” Panazzolo says. Sace guarantees 60% of the commercial risk of the Brazilian importer, while Banco do Brasil insures the remainder.
Sace is adopting Banco do Brasil’s credit and risk assessment system and therefore will not analyse the transactions. The deals can be sealed by Banco do Brasil clients in any of the bank’s 3,972 agencies across Brazil.
“We had to create an agile and competitive solution because an importer has other financing options in the market today. If you do not bring up something differentiated, it’s not attractive,” says Panazzolo.
Normally, ECAs take more than two weeks to authorise a deal. But with this new scheme, the transaction can be approved immediately, he says.
“Such imports have an extremely positive effect in the development and honing of Brazilian manufactured products,” he says. “This later gives Brazilian exports an increase in competitiveness because it adds quality, value to exported merchandise.”
Sace is interested to expand this initiative to other countries within the European Union, Panazzolo reveals. Banco do Brasil has offices in Rome and Milano.