Lula will turn Brazilian development bank BNDES into loan guarantor if he wins
Former President Luiz Inacio Lula da Silva would use Brazil’s development bank BNDES to attract foreign investment through loan guarantees rather than direct financing of projects and companies if he is re-elected in October, a source said. chief adviser to his Workers’ Party (PT).
Aloizio Mercadante, who is working on drawing up proposals for a Lula government, told Reuters the National Bank for Economic and Social Development, as it is officially called, would focus on guaranteeing international loans for financing projects , such as the Inter-American Development Bank. (IDB) does. “For large companies, BNDES must offer guarantees for loans made by private financial sources for public sector projects, as the IDB and other multilateral banks do,” he said in an interview. Wednesday.
This would mark a sharp break with previous left-leaning PT governments, which used aggressive lending and equity investment to build “national champions” in key sectors, often at significant cost to public finances. At the time, critics accused the PT of using the state bank to give easy money to major political donors, such as meatpacker JBS, and to help allied foreign governments, including Cuba, where the BNDES money helped build the port of Mariel.
Lula is the favorite in the presidential race in Brazil, with a narrow lead over far-right President Jair Bolsonaro, who has benefited from PT corruption scandals and BNDES loans using public funds to build projects for foreign allies. BNDES has been providing subsidized long-term business loans for decades to stimulate growth and create jobs in Brazil.
He has also invested directly in companies such as oil company Petrobras and electric utility Eletrobras. Equity sales have raised the market value of its equity portfolio to 79.5 billion reais ($15.7 billion) currently, from 130.4 billion reais at its peak in 2019. Loans have also plummeted during Brazil’s deep 2015-16 recession, when a political corruption probe also targeted the country’s largest engineering and construction conglomerates, which were among the banks’ top private borrowers.
Mercadante, who was chief of staff to Lula’s successor, deposed President Dilma Rousseff, now heads the Perseu Abramo Foundation, a PT think tank examining policy proposals. He said BNDES should still be able to provide large loans in specific cases, but that its aim should be to attract global investment with guarantees, noting that the war in Ukraine has redirected financial flows to western markets.
“There’s no infrastructure investment if you don’t have long-term credit, and the long-term financing capacity of the private sector is very low,” he said. “But if the State, through the BNDES, gives financing guarantees, you bring in private financing and increase our investment capacity.” ($1 = 5.0436 reais)
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