September 21, 2017 |
After years of doling out cheap cash, Brazil’s national development bank BNDES is taking a new path. The state-owned lender is hoping to move away from benchmarking its loans against a discounted interest rate and instead use government borrowing costs as a reference point.
The move is part of a push for BNDES to shrink its role in Brazil’s economy. The approach is intended to pave the way for commercial banks eager to lend at competitive rates. It may seem a logical pivot, but changing the benchmark has provoked fierce opposition.
“Those who currently benefit from lower rates don’t like the change,” says David Beker, chief Brazil economist and fixed income strategist at Bank of America Merr
Brazil's national development bank will move from a subsidized long-term lending rate to a new rate based on the government's borrowing costs, but will short-term pain translate into long-term gain?