The new heads of two Brazilian state lenders, BNDES and Caixa Econômica Federal, said in during their swearing-in ceremony that they will depend less on Treasury funding in coming years, in a sign President Jair Bolsonaro government wants to redefine the role of public-sector banks.

According to the officials, the new administration also plans to make development bank BNDES and mortgage lender Caixa Econômica Federal speed up repayment of Treasury loans. The strategy marks a departure from an economic model championed by previous left-wing administrations that funneled public funds to BNDES and other state banks to create “national champions.”

Economy Minister Paulo Guedes said such policies are «regressive» in a speech where he pledged that public-sector lending by public banks should focus on credit for the unprivileged and let the private-sector handle most lending.

At a swearing-in ceremony for the bank executives, new BNDES head Joaquim Levy said its lending activity should be adjusted in line with the equity of its shareholder, the federal government.

Carlos Thadeu de Freitas, the financial director of BNDES, told two local newspapers that the bank aims to return up to 100 billion reais ($27 billion) in loans owed to the Treasury in 2019.

BNDES had planned to repay 26 billion reais to the Treasury this year, but raising that figure would allow the government to cut public debt faster as is the desire of Bolsonaro’s new economic team, Freitas said.

«The BNDES has to reinvent itself,» Freitas was quoted as saying in newspaper O Estado de S.Paulo. «It cannot compete with private banks, providing working capital to companies which have other means to access such lines.»

In the same vein, Caixa will sell stakes in four subsidiaries to repay loans to the Treasury, said Pedro Guimarães, its new chief executive. The plan will involve the insurance, cards, asset management and lottery units.

Original Story: Reuters |Marcela Ayres
Photo: Caixa Economica Federal
Edition:Prime Yield