Export Financing in Brazil: Challenges and Opportunities
| Date | 01 February 2013 |
| Published date | 01 February 2013 |
| DOI | http://doi.org/10.1111/1758-5899.12021 |
| Author | Pedro Carriço |
Export Financing in Brazil: Challenges and
Opportunities
Pedro Carric
ßo
Head of Country Risk and International Relations, SBCE, Rio de Janeiro
Brazil is collecting the dividends of 15 years of economic
stability and sound policy. As a result, sources of long-
term financing are multiplying as capital markets con-
tinue their development. Nevertheless, certain higher risk
or more complex types of transactions are still not served
by private markets. This is the case for medium- and
long-term (MLT) exports, especially to new markets or
higher-risk countries. For this reason, the Brazilian gov-
ernment provides support through its export credit insur-
ance scheme, which is managed by Seguradora Brasileira
de Cr
edito
a Exportacß
~
ao (SBCE), a private company con-
tracted by the Ministry of Finance. Like other export
credit agencies (ECAs) around the globe, SBCE’s main
mission is to assist export growth in a more competitive
world. In the longer term, one of its goals is to increase
private-sector involvement in MLT export financing in
Brazil as the quality of a guarantee provided by the
Brazilian ECA improves and gains credibility.
The banking sector in Brazil
According to the Central Bank of Brazil (BCB), there were
133 banks in the national banking system as of Decem-
ber 2011. The ten largest Brazilian banks’share of total
assets in the system is about 87 per cent. The same insti-
tutions hold 88 per cent of the deposits, making the sys-
tem highly concentrated.
As the figures in Table 1 show, the banking sector is
in quite solid shape. As a result, shareholders’equity lev-
els according to the Basel II definition reached 16.3 per
cent in December 2011 –well above the 11 per cent
required by the BCB. Leverage, as measured by an
equity-to-assets ratio of 10.1, compares favourably to
other countries. The latest data on credit quality indicate
that nonperforming loans (NPLs) started rising in tandem
with the recent economic slowdown but, as of July 2012,
remain at a manageable level of 3.9 per cent of total
loans with provisioning at 150 per cent. Considering that
the real-estate credit business should continue posting
healthy growth rates and that policy makers still have
some room for monetary, macroprudential and fiscal
loosening in the event of more pronounced economic
deceleration in Brazil or abroad, NPLs seem to have
peaked and should not become a source of further
anxiety.
From the monetary authority’s point of view, the capi-
tal levels mentioned earlier are satisfactory. The stock of
required reserves increased to more than R$450 billion
(US$225 billion) by the end of 2011. Part of this stock
was released into the system to counteract tightening
liquidity for smaller banks in the first half of 2012. The
BCB’s liquidity index, which uses total liquidity/estimated
liquidity needs to measure the liquidity risk for financial
institutions, remained fairly stable at between 1.6 and 2.3
throughout 2011. Despite increased foreign flows and
the recent depreciation of the real, the share of bank lia-
bilities with foreign counterparties was at 8.1 per cent in
December 2011 (compared with pre-crisis levels of 10.4
per cent), reducing financial-sector vulnerability to inter-
national volatility. Loan growth, although still consider-
able, decelerated in 2011 to 19 per cent as a
consequence of macroprudential and monetary-policy
measures enacted by the BCB as well as the deterioration
of credit quality.
While internal variables are favourable, external factors
and regulatory changes are having a limited but still sig-
nificant effect on the Brazilian banking sector. Overseas,
Table 1. Key figures of the Brazilian banking system
December 2010 December 2011
Assets R$3.7 tln
(US$2.2 tln)
R$4.4 tln
(US$2.2 tln)
Loans R$1.4 tln
(US$820 bln)
R$1.7 tln
(US$850 bln)
Deposits R$1.4 tln
(US$820 bln)
R$1.6 tln
(US$800 bln)
Net income R$54.3 bln
(US$31.9 bln)
R$59.7 bln
(US$29 bln)
Shareholders’
equity
R$338 bln
(US$200 bln)
R$384 bln
(US$191 bln)
Return on average
equity
17.2 per cent 16.4 per cent
Return on assets 1.6 per cent 1.5 per cent
Source:BCB, 2012.
©2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:1 doi: 10.1111/1758-5899.12021
Global Policy Volume 4 . Issue 1 . February 2013
116
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