The Inter-American Development Bank announced today the approval of a US$1 billion loan to the Banco Nacional de Desenvolvimento Económico e Social (BNDES) to support expansion, integration and access to financing by the Brazilian micro, small and medium-sized enterprises sector.
This loan is the second US$1 billion financing approved in the context of a US$3 billion Conditional Credit Line (CCLIP) for investment projects launched in 2004. The CCLIP allows BNDES to use resources from three successive operations of up to US$1 billion each in a nine-year term.
The loan is guaranteed by the Brazilian Government and will provide medium and long-term financing for investment projects and for permanent working capital to make firms more competitive. Lending in local currency and other innovations such as flexibility in determining the amortization schedule and terms, and prices based on actual cost of financing were authorized for the CCLIP program in 2006.
“This project not only continues IDB collaboration with BNDES to support development and modernization of micro, small and medium-sized enterprises through medium and long-term financing,” said IDB Team Leader Felipe Gómez-Acebo. “It also gives BNDES the possibility of requesting financing directly in reais, allowing for a more efficient handling of exchange rate situations.”
“This type of innovative financing allows the country to avoid the risks of incurring debt in foreign currency,” explained Gómez-Acebo.
BNDES channels a large portion of indirect loan (onlending) operations to enterprises. Microenterprises, those that have 19 or fewer employees and annual gross sales of $400,000 or less, and the formal small and medium-sized enterprise sector, composed of firms having between 20 and 499 employees and gross annual sales of under $20 million, are key for the entire economy because of their role in industrial modernization and re-engineering of production processes.
The IDB has also supported four very successful multisector credit programs with BNDES since 1995 for a total of $3.5 billion. BNDES, the only significant source of medium- and long-term funding for financial intermediaries, has a strategic role in Brazil in increasing the volume of credit in the economy.
The loan is for a 20-year term with a four-year grace period and follows the IDB strategy agreed with Brazilian authorities in the context of the country´s 2004-2007 Economic Plan to achieve sustained, socially inclusive growth. Local counterpart funds also total US$1 billion.