Friday, June 5, 2015

BNDES data feeds doubts regarding Cuba loans (June 5, 2015)

Brazil’s state development bank, BNDES, published data Tuesday on 320 billion reais ($102 billion) in loans from 2012 through the first quarter of 2015, and an additional $11.9 billion to finance exports of engineering services since 2007, reports Bloomberg.

The data is available via the BNDES Transparente site and specifically includes information regarding credits to export services to other countries, such as Cuba, Angola, Argentina and the Dominican Republic, reports O Globo

The move to publish previously private data comes in response to criticisms the institution is facing criticism of lending to countries like Cuba, big campaign donors and contractors involved in the wide-ranging Petrobras graft scandal. It also comes as experts are criticizing the "state capitalism" model, in which the government controls key companies in vital sectors such as electricity and petroleum, according to a May BBC piece. 

The bank, which lent 1.5 times more than the World Bank last year, has been censured by some for crowding out private lenders who were unable to match its subsidized rates, says Bloomberg. BNDES lent three times more than the World Bank in 2011 and was the largest lender in South America in 2014. The bank supports strategic sectors of the economy through financing the international expansion of Brazilian companies, and holds shares and equity in firms operating abroad.

A Supreme Court decision obliged BNDES to disclose data to an audit court on loans to meat exporter JBS. The bank had argued that it could not disclose clients' details and had refused to deliver that information to an accounting tribunal, reports Bloomberg.

The data shows that the bank prioritizes big companies in its operations, which contradicts its goal of fomenting small and medium sized businesses, reports Opinão y Notícia.

Between 2012 and 2015, 1,160 legal entities (companies, governments and entities) closed operations with the bank. But 57 companies, less than 5% of the total amount snapped up 52.5 percent of the funds, reports O Globo.
"In a country like ours, is it fair to give facilitated and subsidized credit to those who can operate on the stock exchange, capture the foreign market? I believe that the bank should be focused on micro, small and medium enterprises, in innovation and creative economy," says economist Joaquim Elói Cirne de Toledo.

O Tempo reports that the information released shows that five companies implicated in the Petrobras graft investigation received the vast majority of the funds allocated between 2007 and 2015 (years for which data was released). Exame emphasizes the loans received by Odebrecht, the construction giant implicated in the Petrobras scandal.

President Dilma Rousseff has been under fire from opposition lawmakers for lack of transparency regarding loans offered to Cuba. The Brazilian media is focusing on whether loans to Cuba received more favorable rates than those offered in Brazil. 

The financing destined to construction in Cuba, offered by the Compañía de Obras e Infrastructura – a subsidiary of Odebrecht – is of $832 million. Of that total, $682 million were used to finance construction work at the Mariel Port, whose total cost was over $900 million, reports the Havana TimesThe Brazilian financial entity made five yearly disbursements (between 2009 and 2013) to finance each of the stages of the expansion and modernization of the port, as well as its access infrastructure.

Rates on international loans were more favorable than those charged to Brazilians, reports ExameO Globo says its investigation of the recently released numbers show that the bank charged interest rates of 4.44 to 6.91 percent on loans for the Mariel Port construction -- lower than rates charged on Brazilian loans. 

Folha de São Paulo notes that specialists consulted said the loan conditions are normal for the size and complexity of the project, but become atypical when the country's risk profile is taken into account. Cuba, which has no access to capital markets, has the world's worst credit score, along with Venezuela and Pakistan.
Folha compares the project to Eike Batista's Porto do Sudeste, to which BNDES granted, directly and indirectly, approximately R $ 1.74 billion, with higher interest rates and shorter maturities to the Cuban port.

The BNDES says Mariel is a work of "high value, long period of construction" and that the "debt repayment is compatible with the economic life of the project," reports Folha. Through its press office BNDES said interest rates in dollars and reais cannot be compared as the former incorporate so-called "currency risk."

BDES president Luciano Coutinho defended the bank's loans in an interview in Valor (paywall, but coverage of the interview is available on Brazil 247), saying  "All operations were absolutely regular, went through all the procedures and processes of collective decision-making of the bank". He said critics were being intellectually dishonest in their criticism of subsidized loans to Brazilian construction companies acting in international projects, such as the Cuban port. He said such transactions followed rules established in 1996.


News Briefs

  • The Colombian government and the FARC announced the formation of a Truth Commission yesterday. The body will be charged with investigating and establishing responsibility for the atrocities committed during the country's 50-year conflict with the guerrilla group. It is a sign that the slow-moving peace talks in Havana, which have been ongoing since 2012, are advancing, says the Wall Street Journal. Proponents say that such commissions -- which have been implemented in post apartheid South Africa and in post civil war El Salvador -- offer an opportunity for national healing permit society to collectively process a very long list of crimes. Opponents, however, argue that the body will be used to legitimize FARC atrocities. Under the terms of the agreement, the information collected by the commission cannot be used to build criminal cases against guerrillas, government troops or right-wing paramilitary fighters who committed rights abuses. The Miami Herald reports that the commission will only be created after an overall peace deal is reached. It will focus on creating a shared understanding of the conflict, create a space that acknowledges both victims and their victimizers, and to promote reconciliation. A major sticking point in the negotiations, reports the Wall Street Journal, is how to ensure justice for the victims, and whether FARC leaders will serve jail time. The piece quotes Maria Victoria Llorente, director of the Bogotá policy group Ideas for Peace, who said that the guerrillas have long supported the formation of a truth commission because “the FARC is saying: ‘We are not the only ones responsible for the Colombian conflict.’” Llorente said Thursday’s agreement shows that the two sides are getting closer to wrapping up the issue of delivering justice to victims.
  • WOLA's Adam Issacson wrote a review of the current status of the peace talks, arguing that the peace process continues despite the end of the FARCs unilateral cease-fire (See April 16th post.) "It is unclear how many more 'wobbles' this process can sustain," he says. "Yet the Peace and Reconciliation Foundation asserts that more are coming: 'We have information that the FARC are ready to respond with actions against oil and energy infrastructure, which could end in confrontations in many zones of the country,' said the group’s director, León Valencia."
  • There's no such thing as a free TV in Mexico, according to the New York Times. Opposition parties on the left and right are criticizing a government program that will give away 10 million digital television sets, saying it's just vote buying ahead of Sunday's mid term elections.
  • Video footage released in Mexico shows apparent guard complicity in a prison rampage in San Luis Potosí state two years ago that left 13 prisoners dead and 65 wounded. Jailbreaks, massacres and riots are frequent in Mexico's overcrowded prisons, reports the New York Times. The fighting portrayed in the video is believed to be between members of the Zetas and the Gulf Cartel.
  • Farm workers in Baja California won a victory yesterday with an "unprecedented" agreement that will increase wages by as much as 50 percent, reports the Los Angeles Times. The accord ends a three-month strike in the agriculture exporting region, but falls short of the workers' demand for a 200 peso a day minimum wage. 
  • Dissenting and former members of Venezuela's governing Socialist Party requested a government investigation of alleged multi-billion dollar frauds that are said to have capitalized on the country's strict currency controls, reports Reuters.
  • Extortion is a growing problem in Peru, reports InSight Crime. The construction and transportation sectors are popular targets, often with the collusion of corrupt police. (Nobel literature laureate Mario Vargas Llosa wrote about it in his 2013 novel, The Discreet Hero.)  Peru plans to institute a "telephone blackout" in order to combat the phenomenon which is commonly perpetrated via cell phones. Cell phones whose owners have not been properly registered will be deactivated and, starting today, anybody who buys a new cell phone will be required to present an identification card and enter his or her fingerprints into a biometric database.
  • Reducing the legal age at which teens can be tried as adults will not help Brazil's security crisis argues Ilona Szabó de Carvalho in O Globo. "Bringing young people into overcrowded and inhumane prisons will further feed the vicious cycle of violence, rather than reduce it."
  • Trinidadians see local lawmaker Jack Warner as a sort of Robin Hood, according to an AP piece. The former FIFA VP, who is indicted on charges of racketeering, wire fraud and money-laundering, is known for getting whatever he wants, but also for meeting constituents' needs.
  • His successor at the FIFA post, Jeffrey Webb was arrested in Zurich last week at part of the same wide-ranging corruption scandal under investigation by the U.S. Justice Department. Locals in the Cayman Islands are struggling to reconcile Webb's double life, reports the Miami Herald, seemingly squeaky clean at home but allegedly soliciting and accepting more than $6 million in bribes 

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