Brazil Won’t Slow BNDES Lending Before Election, Barbosa Says

The Brazilian government doesn’t plan to slow record lending by the state development bank before the October presidential elections, said Nelson Barbosa, economic policy secretary at the Finance ministry.

The bank, known as BNDES, has enough resources to keep making loans at the current pace until the beginning of next year, allowing President Luiz Inacio Lula da Silva’s successor to decide whether to continue the policy, Barbosa said.

BNDES lending rose 41 percent in the first five months of the year to a record 46 billion reais ($26.1 billion). Such loans contribute to job creation, economic growth, tax collection and private investments, Barbosa said.

“The benefits are bigger than the costs; don’t forget that BNDES is posting profits and pays dividends to the Treasury,” Barbosa said. “Without BNDES some companies wouldn’t get the loans they need. These loans have low default rates and generate jobs, economic growth and employment.”

Policy makers at Latin America’s biggest economy increased banking reserve requirements and raised the benchmark interest rates twice this year to 10.25 percent from a record 8.75 percent low in March to bring inflation closer to the target.

The credit expansion sustained by the bank is putting pressure on policy makers, Fitch Ratings said June 28.

Loans provided by Brazil’s state development bank reduce the efficiency of monetary policy and may push the benchmark interest rate higher, central bank president Henrique Meirelles told Valor Economico newspaper in an interview published July 5.