Brazil searches for solution to billion-dollar concessionaire debt

Friday, October 14, 2016

The Brazilian government is rushing to find a short-term solution for the 6bn reais (US$1.88bn) in arrears that concessionaires accumulated with development bank BNDES under the logistics investments program (PIL).

The money was for bridge loans that were granted directly after auctions closed in order to begin investments while the concessionaires waited for the bank to authorize long-term financing, according to local daily Estadão.

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But because of the Lava Jato corruption investigation, which hit some of the main members of the concessionaires, and the country's economic recession, which reportedly made some of the concessions unsustainable, BNDES slowed the release of funds. The concessionaires were then left without a way of paying back the bridge loans.

When payments were not received, it was up to the bank to execute the guarantees.

Estadão reported that the guarantees were given mainly by Banco do Brasil, but that the problem also affected some private financial institutions.

The Brazilian government and the private sector have both decided that it is no longer possible to delay finding a solution indefinitely. If something is not done in the short term, the 6bn reais loss will have to be absorbed by the banks, which is what happened with Sete Brasil, a company created to build rigs for Petrobras and which reported a 26bn-real loss last year.

The government is now working on a provisional measure to solve the problem by allowing the concessions to be returned and auctioned again without interruption of services, although the companies involved are hoping for another solution.