Brazil Government Takes Steps To Encourage Credit Growth

Brazil's government on Wednesday said it is taking measures to encourage lending in some targeted parts of the economy.

The measures include allowing Brazilian banks to borrow overseas to help finance the international expansion plans of Brazilian companies, and make it easier for small and mid-sized banks to sell their loan portfolios.

The National Monetary Council said Brazilian banks can either lend directly to companies overseas, or they can buy bonds sold by Brazilian companies.

"The target of the measure is to use overseas credit to facilitate the internationalization process of our companies, in a period that the credit conditions abroad are more competitive than in Brazil," the monetary council said in a statement.

Borrowing overseas can reduce costs, as interest rates are much lower than in Brazil, where the benchmark Selic interest rate stands at a towering 11.5%. Brazil's government recently sold 10 year overseas bonds at a yield of less than 5%.

The measure comes amid growing interest among some local businesses to acquire companies abroad.

Earlier this week, Brazil's national development bank BNDES said it is in talks with government-controlled utility Centrais Eletricas Brasileiras (ELET6.BR) to finance its bid for a stake in Energias de Portugal (EDP.LB).

Eletrobras, as the utility is known, is one of two Brazilian companies that have made a bid to buy a 21% stake in the Portuguese utility. The stake is valued at almost 2 billion euros, but BNDES Vice President Joao Carlos Ferraz declined to say how much BNDES would provide.

The purchase, if successful, could pave the way for other buys by Brazilian companies abroad, as the bank is studying financing for similar operations.

"The BNDES is in talks with the central bank to see if we can finance purchases of companies out there by Brazilian companies," Ferraz said.

In the meantime, the National Monetary Council allows local banks to dilute the costs of sales of credit portfolio sales until 2015, in an attempt to reduce expenses for medium and small banks.

After the global crisis in 2008, the central bank authorized local medium and small banks to sell their part of their credit portfolios to bigger players to provide liquidity for the financial sector.

-By Rogerio Jelmayer, Dow Jones Newswires; 55-11-3544-7071; [e-mail]