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Showing a certain vague coherence, prudential measures from Brazilian central bank BCB have attacked the excesses of consumer credit, while the government has continued to back the corporate credit and investment activities of the omnipresent national development bank BNDES.
In a speech to the Rio de Janeiro industry federation Firjan this week, BCB's rules and financial system organization director, Luiz Awazu Pereira da Silva, defended macro-prudential measures imposed by the central bank in early December as addressing two economic problems simultaneously.
First and foremost, Pereira argued that the measures - which raised capital and reserve requirements, particularly on longer-term consumer credit products -, were part of BCB's response to what its economists perceived as heightened risk from terms that were too long and unworkable collateral arrangements.
"The macro-prudential measures did not touch credit to companies or productive investment, both of which have been growing at adequate rates," the BCB official said during the speech.
Corporate credit rose 15.4% in 2010, while consumer credit was up 18.8%, according to the end-December BCB data.
Pereira also said that the importance of the credit channel on inflation in Brazil could not be denied, and that the fact that inflation is running above the 4.5% target had influenced the decision to implement the measures. Inflation came in at 5.99% in the 12-month IPCA consumer price index to end-January.
BNDES STILL BOOMING?
While BCB eyes consumer credit, the government continues to make moves to strengthen BNDES, Brazil's ever-present purveyor of corporate financing and investment both via direct and pass-through transactions.
Last week, a presidential measure set out a plan to give BNDES and savings bank Caixa Econômica Federal (CEF), two of Brazil's largest federally controlled financial institutions, 8.6bn reais (US$5.15bn) worth of stock held in two other state-owned firms - energy giant Petrobras (NYSE: PBR) and utility holding group Eletrobras (NYSE: EBR).
In 2009, the government surprised many with its capital injection of 100bn reais into BNDES. This was followed by an additional 80bn reais in 2010, but the country's minister of development, industry and trade, Fernando Pimentel, was quoted by news agency Agência Estado as saying the injection this year would be below the 80bn-real mark and would show a "descending curve" of support.