RIO DE JANEIRO, Dec 23 (Reuters) - Brazil’s state development bank BNDES on Tuesday said it will reduce the level of government subsidies in some of its corporate loans, reinforcing government efforts to limit public spending in coming years.
The bank, which is the country’s largest provider of corporate loans, will continue to index its loans to the so-called TJLP rate to “priority” business sectors, as well as small and medium-sized businesses, according to an e-mailed statement.
Priority sectors include innovation, infrastructure, renewable energy, mass transit, water and rail transportation, sewage and public policy improvement, the statement said.
Other sectors, however, will see a combination of higher spreads over TJLP rates and a reduction in the share of BNDES funds granted to them at the TJLP rate.
After narrowly winning re-election in October, President Dilma Rousseff has vowed to rein in spending to regain the trust of investors in the once-booming economy and fend off a potential credit downgrade.
Her government on Friday hiked the TJLP rate for the first time in two years to 5.5 percent, a move that aims to reduce the subsidies that have eroded the country’s finances.
To make up for less subsidized lending, companies will need to seek any additional financing at market rates, granted by banks, BNDES said.
“BNDES will be stimulating a greater market presence in long-term credit concession,” the statement said. “The bank can maintain its strong support for Brazilian businesses, sustaining and growing investment while at the same time remaining aligned with the government’s aim to rationalize the use of resources.”
Earlier this month BNDES president Luciano Coutinho said he expects the government to slow contributions to the bank in 2016 and 2017. (Reporting by Marta Nogueira; Writing by Asher Levine; editing by Andrew Hay)