Brazil Creating ‘Champions’ With $58 Billion Loans: Week Ahead

By Fabiola Moura and Francisco Marcelino
May 11 (Bloomberg) -- Brazil’s state development bank is financing the biggest acquisitions in the country as other sources of credit dry up, driving a consolidation in the meat, ethanol, paper and telecom industries.
“They are trying to help the creation of national champions,” said Marcello Hallake, a lawyer focused on mergers and acquisitions at Thompson & Knight LLP in New York, who has spent more than a dozen years advising in Latin America. “They want to encourage the formation of large Brazilian companies that could then in turn acquire outside of Brazil.”
The Rio de Janeiro-based bank, known as BNDES, expects to lend as much as 120 billion reais ($58 billion) this year, 30 percent more than the 92.2 billion reais set aside last year, according to the bank’s President Luciano Coutinho. BNDES Participacoes SA, the bank’s investment unit, holds its quarterly board meeting on May 14 with Brazil’s Trade Minister Miguel Jorge to discuss its budget, investments and strategy.
A spokesman for the bank declined to comment.
“We’ll always be ready to support consolidation when efficient companies can create assets that are more productive,” Coutinho told reporters in Sao Paulo on Feb. 6. “That results in gains for the economy.”
The bank’s role in financing acquisitions is increasing as deals wane because of the credit crisis, Hallake said. A total 95 merger and acquisition deals worth $18.9 billion have been announced in Brazil this year through March 7, down from 181 deals valued at $34.7 billion in the same period last year, according to data compiled by Bloomberg.
BNDES is “playing an important role now that credit is scarce,” Hallake said.