March 13, 2002

BRAZIL, IDB SIGN MEMORANDUM OF INTENT ON $900 MILLION LOAN FOR MICROENTERPRISE, SMALL AND MEDIUM-SIZED BUSINESSES BNDES to carry out the $1.8 billion program

FORTALEZA, Brazil - Inter-American Development Bank President Enrique V. Iglesias and Banco Nacional de Desenvolvimento Econômico e Social (BNDES) Director Isac Roffe Zagury today signed a memorandum of intent for a $900 million loan to provide financial support to microenterprises and small- and medium-sized firms.

The signing ceremony was held in conjunction with the annual meeting of the IDB’s Board of Governors, which took place in this northeastern Brazilian city March 11-13.

The resources from the IDB loan, to be administered by BNDES, will be instrumental in providing swift and massive funding to a highly productive sector during a period of tight credit. The loan will also help deepen Brazil’s financial markets and supplement its efforts to accelerate growth and improve income distribution.

BNDES will on-lend the resources operating through a network of more than 180 intermediary financial institutions in the formal, regulated financial sector. Individual subloans will support investments and working capital associated with projects to modernize and expand production and service activities.

Loans to microenterprise, defined in Brazil as firms of not more than 19 employees with annual sales of up to $400,000, will be capped at $200,000. The ceiling on loans to small and medium-sized companies, defined as those with annual sales at between $400,000 and $20 million, will be $7 million.

Microenterprise and small and medium-sized firms constitute the major share of Brazil’s economic activity and are the main source of employment for low-income groups, but access to banking financing remains limited and, mostly, restricted to short-term working capital loans. This program, offering medium and long-term financing for investment projects, will provide resources for growth.

BNDES will contribute $900 million to the program, bringing the total amount of financing available to $1.8 billion.

In previous operations the IDB made 17 direct loans to BNDES for a total of $3.3 billion.