...Development Bank Funding Reliance: Banco Nacional de Desenvolvimento Economico e Social (BNDES) has extended loans to 52 of the 62 international corporate issuers Fitch rates in Brazil. These 52 companies had 12% of their total debt from BNDES during 2014, compared with 14% in 2011. Rated companies that have not received support, either through debt or equity, from BNDES tend to be small. Combined, these 10 companies only have BRL63 billion of debt outstanding. Fueling Brazil's Deficit: BNDES pegs its loans at the long-term TJLP interest rate of 6.5%, while the government raises funds at the central bank rate (SELIC) of 14.25% for its sovereign bonds. The difference in rates is a cost that burdens both the government and taxpayers as the government is BNDES's source of funds. Brazil's national monetary council's September 2015 decision to raise the TJLP to 7.0% in fourth-quarter 2015, the fourth consecutive increase in the TJLP, somewhat reduces the burden of this gap. Sharp Drop in Lending:...
