Brazil: Interest rate reduction on public financing for the export of capital goods
Description
On 10th September 2009, the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico, BNDES) implemented a new Program for Investment Support (called BNDES PSI) throught Resolution nº 3759, with a specific sub-program for the pre-shipment phase of exports.
The objective of this Sub-Program is to finance the production of capital goods destined for exports. Also, this sub-program establishes reduced interest rates for the financing of the production of these goods.The eligible goods identified as capital goods are indicated in the BNDES Circular Letter nº 31, of July 30th 2007.
The deadline for the operation of this program was first established as December 31st 2009 but BNDES has announced its extension until June 30th 2010.The financing conditions remained the same and are set out in BNDES Circular Letter nº75 of July 16th, 2009.
The BNDES Circular Letter nº 75/2009, of 07.16.2009, which estabilishes the criteria and conditions for the implementation of the sub-program, sets the annual fixed interest rate of 4.5%, which includes the remuneration of the financial agents (3%) and of BNDES. According to the BNDES, as a consequence of the new sub-program, the interest rates charged would fall from a yearly average of 12.05% to 4.5%. (BNDES website, 06.29.2009)
The measure does not alter the rules already in force and traditionally applied by BNDES in regards to the pre-shipment financing (for example, the local content requirement of 60% or more).
The Ministry of Finance Administrative Act (Portaria) nº 381, issued on July 14th 2009, establishes an "equalization" by the National Treasury to make feasible the interest rate differential granted by BNDES.
The measure applies equally to Brazilian as well as foreign companies established in Brazil.
The criteria for the selection of the main trade partners affected was the identification of the countries that account for 75% of total exports of the products affected by the measure.
The financing conditions were changed by Resolution nº 3851 of April 29th 2010, of the Brazilian Central Bank (BACEN). In the case of the pre-shipment financing operations contracted after 1 st July 2010 the interest rate charged will increase from 4.5% to 5.5% per year. The measure entered into force in the date of its publication and has a retroactive effect to December 31st, 2009.
Recently, through the Resolution nº 3910 of 29th September 2010, the Brazilian government decided to increase the total financing ammount to R$ 134,000,000,000.00 and the interest rate from 4.5 to 5.5 only for financing operations applied to acquision and production of certain capital goods for operation contracted from 1st July 2010.
The deadline for the operation of this program was extended to 31st March 2011.
Any Evidence-Based Deliberation:
| Question | Result |
|---|---|
| Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? | Don't know |
| Is there any evidence that alternatives to the proposed measure were considered? | Don't Know |
| Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government? | Don't Know |
| Was such evidence identified? | Don't Know |
| Is such evidence publicly available? | Don't Know |
| Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives? | Don't Know |
| Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken? | Don't Know |
| Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory? | Don't Know |
| Did the government state its intention to review the measure within one year of implementation? | Don't Know |
Date Discovered: 30/06/2009
Implemented: No
Date of inception: 16 Jun 2009
Duration: 21 months
GTA Evaluation: Amber
Source:
BNDES ( www.bndes.gov.br); Circular BNDES nº 75/2009; Portaria Ministério da Fazenda nº 381, from 14.07.2009;Resolution from the Conselho Monetário Nacional, nº3759, from 09/07/2009.
http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/Sala_de_I...
http://www.in.gov.br/imprensa/visualiza/index.jsp?jornal=1&pagina=63&dat...
Resolution nº 3910- http://www.in.gov.br/imprensa/visualiza/index.jsp?jornal=1&pagina=44&dat...
Government Response:
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