Brazil: Congress wants to hinder BNDES international financing

The new legislatures in the House and Senate started less than two weeks ago, and there are already 12 proposals concerning the National Bank for Economic and Social Development (BNDES).

Most of the proposals in Congress intend to regulate or prohibit the state-owned bank from making loans for works abroad, a policy that President Luiz Inácio Lula da Silva (PT) and BNDES President Aloizio Mercadante have said will be resumed.

Lula announced the first investment in neighboring Argentina’s socialist government of Alberto Fernández: he intends to lend at least US$600 million to construct a gas pipeline.

In the past, between 2003 and 20016, Lula and Dilma’s governments financed around 80 projects abroad, allocating more than US$10 billion to 13 “friendly” countries.

The Mariel Port in Cuba and the Caracas subway were built, along with gas pipelines, roads, and engineering works in Latin American and African countries, such as Mozambique, where an airport was built.

To make matters worse, Cuba, Venezuela, and Mozambique have defaulted on more than US$1 billion to Brazil.

“The apprehension that has been caused by the prospect of resuming the pace of external financing is justified, especially in view of the recent history of defaults involving these credit operations,” wrote Congressman Pedro Lupion (PP-PR).

He presented Complementary Bill 23/2023 to condition any financing of works abroad to the specific authorization of the Senate.

The congressman recalls that the defaults were covered by the Export Guarantee Fund (FGE), linked to the Ministry of Finance, and if there is no change in legislation, taxpayers will continue to pay the bill.

“In short, the Treasury will bear the losses arising from these transactions, and all taxpayers will pay the bill.”

Congressman Alfredo Gaspar (União Brasil-AL) also does not intend to ban the loans but to impose two conditions: only countries with good ratings in international credit risk agencies can receive funds, and loans are prohibited to countries that have failed in their credit obligations in the last five years.

“It is not reasonable to simply impede or prohibit the BNDES from carrying out credit operations in foreign countries,” justified the congressman in Bill 22/2023.

“Brazil has been benefiting from this financing instrument originated by similar banks in developed countries.”

Congresswoman Clarissa Tércio (PP-PE) intends to prohibit the BNDES from financing projects to foreign governments that have been in default.

“It is worth noting that financing operations for the export of services made by the BNDES are under review by various legal authorities,” she highlighted in the justification of Bill 358/2023.

Aureo Ribeiro (Solidarity-RJ) has the same intention as Clarissa: prohibit new loans to foreign governments that are in default, but also those with outstanding debts exceeding 20% of the disbursed amount.

The goal, said the congressmain the justification of the PL 347/2023, is to “create means to avoid, or at least make it more difficult, for the government to make the same mistakes as in the past, by granting loans to foreign countries that are bad payers.

Congressman Vicentinho Júnior (PP-TO) also wants to implement conditions for international loans by BNDES.

Citing the “suspicions of favoring companies” and the “very serious problem of default”, the congressman proposes, as Project 153/2023, to prioritize investments in Brazil, allowing international loans only when the works on the national territory are on schedule, and prohibiting financing, for a period of four years after settlement, to countries that have paid their debts in arrears.

Federal congressman Daniel Freitas (PL/SC) is collecting signatures for a Proposal of Amendment to the Constitution (PEC) that submits the financing by BNDES of works abroad to Congress.

Proposals to completely prohibit financing abroad

Congresswoman Rosana Valle (PL-SP) intends to ban any foreign loans completely.

“During the PT government, which lasted more than a decade, there were many corruption cases in state companies and public banks.”

“In addition, there were not rare times when development banks were used to benefit works of ideological partners of the government,” she justified in PL 374/2023.

In the Senate, Plínio Valério (PSDB/AM) filed PL 87/2023, which prohibits BNDES from financing works abroad, except “to allow for the financing of exports of goods produced in Brazil and acquired by foreign governments, to avoid eventual damages to the country’s industrial sector,” he wrote.

He said the proposal deals with the resubmission of Bill 261/2015 by the non-re-elected senator Reguffe (Podemos-DF).

Congressman Mendonça Filho (União-PE) presented Complementary Bill 1/2023, which prohibits BNDES from financing projects abroad.

Remembering the defaults and the lack of direct benefits to the country, the congressman said, “the Brazilian taxpayer ends up being penalized, ending up paying for a work that did not directly benefit the country.”

“This is happening in a context where Brazil still lacks basic infrastructure, such as sanitation, roads, and housing. That said, it raises the question about an ideological bias in the granting of subsidized loans for works and services performed abroad,” he criticized.

With information from Revista Oeste