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SAO PAULO, Sept 3 (Reuters) - Loan requests and disbursements at Brazil's state development bank BNDES slumped in the first six months, in a sign of a dramatic drop in capital spending plans as Latin America's No. 1 economy braces for its deepest recession in a quarter century.
Companies requested 47 percent less loans between January and June this year from the year-earlier period, while disbursements tumbled 18 percent to 68.775 billion reais ($18.3 billion) in the period, BNDES said in a report published on its website on Thursday.
In the 12 months through June, disbursements reached 172.56 billion reais, slightly above the bank's target of 170 billion reais for the year, the report said. The 7 percent decline in annual disbursements was fueled by reductions of 17 percent and 6 percent in lending to commerce and services borrowers and manufacturers, respectively.
About 50 percent less loans were approved in the first half from a year ago, suggesting the Rio de Janeiro-based lender is implementing stricter criteria for credit allocation.
The sharp declines in all credit indicators suggest that companies are paring back or delaying investment plans as the economy contracts. For decades, Brazilian companies large and small have been hooked on cheap credit from BNDES, which is regarded as the nation's main source of long-term corporate credit.
BNDES is gradually streamlining loans as part of efforts by President Dilma Rousseff's administration to mitigate the impact of a mounting budget deficit and the crowding-out of banks and debt markets from corporate financing. BNDES grew too large since Rousseff's first term started in 2011, and credit rating firms have urged her to downsize it as a condition to maintain the nation's investment-grade status.
BNDES is among banks most at risk over loans to state-controlled oil producer Petróleo Brasileiro SA and third-party contractors in the oil services and engineering industries in the wake of an alleged corruption scheme unveiled at the company.
$1 = 3.7548 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Bernard Orr