January 5, 2017 / 2:36 PM / 2 years ago

UPDATE 1-Brazil's BNDES to focus on projects of high social impact

(Adds details, background throughout)

By Marta Nogueira and Guillermo Parra-Bernal

RIO DE JANEIRO/SAO PAULO, Jan 5 (Reuters) - Brazil’s state development bank BNDES plans to focus loan disbursements on areas of high social impact from education to healthcare and infrastructure, taking a first step towards rooting out decades of cheap financing for large business.

As part of the plan, BNDES will raise the revenue threshold to classify small and mid-sized firms so they have preferential access to credit, Chief Executive Officer Maria Silvia Bastos Marques told reporters in Rio de Janeiro. Other focus areas include innovation and the environment, she said.

The bank’s new lending policy, which Bastos had announced a few months ago, takes effect later this month.

With the new guidelines, the bank wants to incentivize companies or projects in those sectors to access credit at a below-market interest rate known as TJLP, the benchmark for BNDES loans.

About 1,500 firms across Brazil could gain additional access to BNDES loans with the new guidelines, she said.

By giving more access to cheap financing to small- and mid-sized companies, Bastos is discouraging rampant borrowing by Brazil’s largest firms, which widely enjoyed subsidized credit during 13 years of left-wing Workers Party administrations that ended last year.

“We’ll be more actively financing projects, to have a positive impact on what’s good for the Brazilian society,” Bastos said. “This is not about giving out credit just to show off that ‘we’re lending some a lot.’”

Since her appointment last May, Bastos has implemented the most ambitious turnaround of BNDES in two decades while reversing years of costly support for handpicked local groups.

She has imposed tougher terms for disbursements, asked BNDES-appointed board members to tighten scrutiny of decisions at major companies and boosted the bank’s role as a guardian of corporate transparency.

Bastos argues that an over-reliance on state lenders for long-term credit had put a heavy burden on BNDES, fanned regulatory uncertainty and made subsidies costlier than initially thought.

The TJLP rate that BNDES charges on most loans has for decades run below the benchmark Selic overnight lending rate, partly because of an urge by politicians to boost growth and create jobs. However, the implicit subsidy in the subsidized loans could cost taxpayers about 1 percent of gross domestic product this year.

Under the new rules, BNDES will keep financing up to 80 percent of the value of a project. Previously, that limit varied accordingly with the strategic importance of an industry. (Editing by Bernadette Baum)

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