BNDES consultations for new loans drop 46% in Jan-Oct

Consultations for new loans with Brazil's national development bank BNDES dropped 46% year-on-year to just under 109bn reais (US$29.2bn) in January-October, according to data released by the financial institution on Thursday.

This was the lowest level of consultations for the period since 2003 when corrected against the consumer price index. In 2003, consultations totaled 72bn reais at today's prices.

A consultation is the first step for a funding request from the bank. It is followed by the classification of the transaction according to the rules of the bank, loan approval and, finally, the disbursement of funds to the company.

Because it is a preliminary process, consultation is considered a leading indicator of future financing and investment in the economy, meaning that a drop in requests is of concern to economists.

According to Cláudio Frischtak, president of Inter.B Consultoria Internacional de Negócios, the decrease in consultations is predictable in a period of recession.

"The magnitude of the decline suggests a plunge in [business] expectations, deep pessimism and, consequently, a slower recovery in 2017 and 2018, if this process doesn't become more pronounced," Frischtak told Folha de S.Paulo.

The number of consultations could also have been affected by changes in BNDES's regulations, which have made financing more expensive and restricted.