Brazil's BNDES returns to international arena via deal with Chinese bank

The administration of Brazil’s President Luiz Inácio Lula da Silva is promoting the return of federal development bank BNDES to the international arena, which could prove beneficial for Brazilian engineering and construction firms.

In a statement, BNDES said it signed a deal with the China Development Bank (CDB) to jointly raise up to US$1.3bn to finance projects in the infrastructure, energy, oil and gas, mining and sanitation sectors.

“When a company competes for a project and has experience in engineering and construction, as the major Brazilian companies have, having a financier behind them radically changes the scenario and makes the proposal much more competitive," Alexandre Garcia, a senior engineering and construction sector analyst and associate director at Fitch Ratings, told BNamericas.

The deal was part of a series of agreements signed between Brazil and China during last week’s Lula visit to China.

“This agreement with CDB is the result of the return of Brazil's leading role in the world. An internationally respected country opens up more opportunities for attracting and diversifying funding sources for BNDES, which will generate more jobs and income in our country in the future," said BNDES president Aloizio Mercadante.

During previous Workers party administrations (Lula's previous two terms and his successor Dilma Rousseff’s) between 2003 and mid-2016, BNDES financed several engineering projects outside Brazil, generating a significant increase in the backlog of construction companies.

This strategy suffered a severe blow as a result of the massive Lava Jato corruption scandal at the beginning of 2014, which showed that several Brazilian construction firms were paying bribes across Latin America to secure contracts. From mid-2016 until the end of last year, BNDES did not fund any projects outside Brazil.

Since taking office in January, Lula has also said his government plans to help finance the construction of the Vaca Muerta gas pipeline between Argentina and Brazil.