(2010-08-25) Brazil Government Planning to cut Government Funding to the Country’s National Develo
The Brazilian national development bank, BNDES, will have its funding from the Brazil
(Press Release 25-Aug-2010) The Brazilian national development bank, BNDES, will have its funding from the Brazilian government reduced and instead plans instituted to get it funds from the private sector, the Brazilian Finance Minister announced last week.
The Minister of Finance, Guido Mantega said the government’s recent heavy funding for BNDES will be cut and more funds raised from the private sector.
The announcement comes after about 180 billion reals of financing the government gave BNDES over the last 18 months only. However, according to the Brazilian government, this huge funding, equivalent to about US$102 billion was critical in maintaining a credit flow in the country’s economy during and after the financial meltdown globally.
Even so, analysts believe BNDES has increasingly gotten so dominant and is becoming a burden to Brazilian tax payers given the fact that its annual loans have doubled from what they were in 2008. But that is expected to change as the Treasury announced that it will not be funding the bank with the huge amounts witnessed over the last two years.
In its plan for alternative funding for the national development bank, the Brazilian Treasury reported that the bank will turn to the private sector for additional funding resources. In that regard, the Minister said the treasury was currently developing a plan that will enable BNDES tap more funding from the private sector than from state coffers.
The plan will be announced in a period of 4 to 6 weeks, said the Minister during a press conference. Analysts expected the government to issue details of its plans but the Minister reiterated that the government was keen on sourcing for funds from mortgage supported securities and debentures for BNDES.
That will in effect ensure that BNDES does not lack investment for the country’s economy, added the Minister. BNDES disbursed 137 billion reals in loans and guarantees in 2009 alone, but sceptics have criticised it for lending to a few major players in the country. BNDES has also been criticized for crowding out private banks by providing below-market rates on loans.
The Brazilian Development Bank (BNDES) is a federal public company associated with the Ministry of Development, Industry and Foreign Trade. Its goal is to provide long-term financing for endeavours that contribute to the country's development. BNDES is the second largest development bank in the world and has been behind some major investment undertakings in Brazil in the various sectors of the country’s economy.
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