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Brazil's BNDES seeking multilateral funding

Bnamericas Published: Friday, May 15, 2020
Brazil's BNDES seeking multilateral funding

Brazilian development bank BNDES is in talks with multilateral institutions to raise fresh cash as part of efforts to fuel the economy. 

BNDES has been one of the main vehicles used by the government to support the ailing economy amid the coronavirus crisis. 

The bank has been reluctant to sell its extensive equity assets given capital market volatility, preferring to tap other funding sources.

"We’re talking with several multilateral organizations to raise funds and increase our liquidity and financing capacity," said Bianca Nasser, finance director of BNDES on Friday during a webcast with reporters. 

EFFORTS SO FAR 

Since the eruption of COVID-19 in mid-March, BNDES has provided 13bn reais (US$2.2bn) in loans to companies in the sectors most affected by the crisis. 

"One of the main challenges that we have seen since the beginning of the crisis is to take money from the financial system to the end of the economic chain, feeding local companies, mainly medium and small companies," said BNDES’s CEO Gustavo Montezano. BNDES estimates the loans helped protect 2.2mn jobs.

The bank also said it has suspended interest rate payments, benefitting 19,000 clients that have 8.7bn reais in outstanding loans. 

In addition, BNDES has approved this year 2.3bn reais in loans to finance working capital, and another 1.6bn reais to finance the payroll of SMEs. 

The bank ended the first quarter with a loan portfolio at 442bn reais, up 0.7% from the end of 2019. 

The development bank added that it is in advanced talks with major airlines Latam, Azul and Gol to provide financial support via a syndicate of banks. 

BNDES is also structuring financial support for electricity distributors and automakers. 

ECONOMIC IMPACT 

In March, the central bank's IBC-Br economic activity index, considered a GDP proxy, contracted 5.9% versus February. In the first quarter, the IBC-Br shrank 1.95% year-on-year. 

"The 1Q20 real activity print was weak but still not representative of the outlook for the economy since the impact of the COVID-19 pandemic was felt mostly just during the 2H March," wrote Alberto Ramos, an economist at Goldman Sachs, in a note on Friday.

"Going forward, we expect overall activity to be severely impacted by the escalating voluntary and mandated measures to restrict movement and promote social distancing," he added. "Furthermore, activity will also be negatively impacted by the sharp tightening of domestic financial conditions, rapidly wakening external demand and deterioration of the terms of trade."

Brazil is considered by world health authorities as one of the global epicenters of the pandemic with the number of cases and fatalities on a steep upward trajectory.

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