Brazil's Development Bank wants greater Latam ties

Reuters, 05.13.03, 12:33 PM ET By Denise Luna RIO DE JANEIRO, Brazil (Reuters) - After decades of bankrolling growth at home, Brazil's National Development Bank is turning into an instrument of Latin American integration in the hands of the country's new center-left government. President Luiz Inacio Lula da Silva has said exports and trade ties are key priorities as Brazil, Latin America's largest economy, aims to assert itself as leader of a region most of whose economies are much worse off than Brazil's. "Apart from fulfilling its traditional role, the bank will be an instrument of South American integration," BNDES Vice-President Darc Costa told Reuters before going to Argentina to discuss a new credit line to boost trade. Jose Augusto de Castro, director of the Brazilian Foreign Trade Association, was only cautiously optimistic about planned financing of neighboring countries' exports. "From the economic point of view this only strengthens our competitors," he said, although politically, he added, there were more advantages to the BNDES' new role. The government has promised $2.6 billion of BNDES credit lines to Venezuela, Bolivia, Argentina and Uruguay. The loans are designed to support mutual trade or to fund infrastructure expansion, as in gas-rich Bolivia. The BNDES, whose credit portfolio is 119 billion reais ($42 billion) and whose planned financing for this year is 34 billion reais, will also take part in a regional joint effort to increase exports to other countries. Set up in 1952 by President Getulio Vargas to promote Brazilian industry, the bank financed industrial and agricultural development. In the 1990's, the BNDES spearheaded Brazil's privatization drive, a process that is unlikely to continue under Lula, analysts say.

LARGER LATAM BLOC FOR FTAA TALKS De Castro said the new government was apparently not only trying to boost trade in the region, weakened by years of economic crises, but also create a wider Latin American bloc to defend its position better in talks on a U.S.-proposed Free Trade Area for the Americas. "That way, the financing makes sense," de Castro said. Developing Latin American countries fear a trade pact with the U.S. and Canada may expose their weaker economies to what they see as unfair competition and cause an industrial slump. Brazil is a key member of the Mercosur trade bloc which also includes Argentina, Paraguay and Uruguay, with Bolivia and Chile as associate members. BNDES' announcement last month of its entry into the Andean Development Corporation, replacing Brazil's Treasury, shows the country's interest in expanding its role beyond Mercosur. Its stake in the organization, which borrows funds abroad for infrastructure projects, will rise from 2.5 to 20 percent, making the BNDES its biggest single shareholder. Brazil is only an associate member of the corporation which has up to 200 planned regional projects worth about $24 billion to be financed. The Andean Community includes Colombia, Ecuador, Peru, Bolivia and Venezuela. One of the biggest projects is a $1 billion credit line for bilateral trade between Brazil and indebted, recession-hit Argentina. Bilateral trade peaked at $20 billion a year in the 1990's but now is less than half of that. BNDES' Costa also plans to study infrastructure projects in Argentina and possible joint work in textiles, automaking, petrochemicals and food for export to other countries. The percentage of Brazil's exports which go to other South American countries has fallen to 16 percent so far this year, from 17 percent in 2002 and 26 percent in 1998.