Investment

Brazil investment poised to rise on credit-report

August 04, 2009

Brazilian purchases of industrial machinery and equipment likely will rise in the coming months as signaled by a surge in demand for credit at the state development bank, the daily newspaper Valor Economico said on Tuesday.

Since the BNDES, as the Rio de Janeiro-based lender is known, announced in June a reduction in borrowing costs equivalent to about 3 percentage points, demand for credit for the purchase of new machinery jumped and is now expected to double on a month-on-month basis, Valor said, citing Claudio Moraes, a senior BNDES executive in charge of industrial loans.

Investment, or capital spending by companies that includes the construction of facilities and purchase of machinery, pulled growth between 2004 and 2008, spurring the longest stretch of economic expansion in Brazil since the early 1970s. It tumbled after the onset of the global credit crisis, affecting confidence and putting the country in recession for the first time in almost two decades.

Loans by the BNDES for new machinery purchases should rise up to 13 percent this year to 30 billion reais ($16.3 billion), compared with a plunge of 11 percent in the 12 months through June, Valor quoted Moraes as saying.

Last month, industrial machinery makers in Brazil such as Kepler Weber, Industrias Romi , Gasparini and firearms maker Forjas Taurus said customers are sounding them out for new products and financing conditions, a signal factories might be mulling resuming production.

On Monday, the government said industrial output in Brazil had had its worst six-month tumble in 34 years after confidence faltered and credit dried up in the wake of the global economic downturn.

By Guillermo Parra-Bernal

Source: Reuters (www.reuters.com)