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 Times. The 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 Exame. O 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

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• 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."

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• 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 

• Sixty-three organizations of civil society called for the impartial, professional, expedite, convincing and transparent investigation surrounding the acts of violence that occurred in Apatzingan, Michoacan, in January of this year. (See April 20th post.)

• Happy Friday: Check out this ode to feijoada in the New York Times Magazine.