SAO PAULO, Aug 2 (Reuters) - Loan disbursements at Brazil's state development bank BNDES could fall up to 20 percent this year, signaling a dramatic drop in capital spending plans as Latin America's No. 1 economy struggles with a slow recovery, Chief Executive Officer Paulo Rabello de Castro said on Wednesday.
At an event in São Paulo, Rabello de Castro said disbursements at the bank may reach about 70 billion reais ($22 billion) this year through a total 400,000 contracts to large and smaller companies alike. BNDES loaned about 88.3 billion reais in 2016.
Companies have obtained 42 percent fewer loans between January and June this year from the year-earlier period, putting disbursements at about 40 billion reais in the period. The decline in disbursements has lost steam, though, Rabello de Castro said, as the country reels from a three-year credit crunch.
Rabello de Castro said BNDES, Brazil's main source of long-term corporate credit, has the ability to raise funding locally and abroad, underscoring efforts to make it less dependent on National Treasury money.
Economists have said the over-reliance of domestic companies on state lenders for long-term credit put a heavy burden on BNDES, fanned regulatory uncertainty and made credit subsidies costlier than initially thought.
$1 = 3.1311 reais Reporting by Natalia Scalzaretto; Writing by Guillermo Parra-Bernal; Editing by Bernadette Baum and Bill Trott