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Brazil: Is BNDES too big for its own good?

Development bank crowds out private sector; But has vital role in infrastructure development

BNDES, Brazil’s state-run development bank, was one of the biggest investors in September’s record $70.1 billion share offering by Petrobras, Brazil’s oil company, but experts say it has become too big and is crowding out long-term lending by the country’s private-sector banks.

BNDES was established in 1952 and during the past decade it has become one of the biggest lenders to corporates in Brazil, often helping them to finance international acquisitions. During the 12 months to the end of May, it made disbursements of R$151 billion ($85.8 billion), 64% more than in the same period the year before. In comparison, the World Bank disbursed $38.9 billion between June 2009 and May this year.

The Brazilian state – through the country’s sovereign wealth fund, the country’s national treasury and BNDES – bought about 2.8 billion of the 4.27 billion shares offered by Petrobras in September. The three entities combined hold a 49% stake in Petrobras and 64.3% of voting shares (before the share offer, they had 39.8% and 57.5% of the voting shares).

It is estimated that BNDES has a stake bigger than 11.5% in Petrobras’s share capital against 7.7% before the share offer. Before the share offer, BNDES had lent Petrobras a total of R$25 billion.

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