August 27, 2013 / 6:18 PM / in 4 years

Brazil asks banks to unite to finance crucial logistics tenders

SAO PAULO, Aug 27 (Reuters) - The Brazilian government on Tuesday proposed major banks join forces to provide financing for companies bidding on major infrastructure projects, the latest sign that authorities are worried about participation in the upcoming tenders.

The finance ministry’s secretary of economic monitoring, Antonio Henrique Silveira, said the government proposed that private and public banks form a syndicate to finance the projects. He said that the government will also create a guarantee fund to reduce the risks for banks.

The announcement came after Finance Minister Guido Mantega met earlier in the day with the heads of top banks including Banco do Brasil Banco Bradesco, Itau Unibanco, BTG Pactual and others.

President Dilma Rousseff’s government is placing big hopes on the multi-billion dollar infrastructure projects as a way to jump-start an economy that has been stuck in a rut for the last three years.

However, many businessmen warn that the low rate of returns offered, coupled with concern over government interference and scarce global liquidity, is making those road, railway, ports and airport projects less attractive.

The government has already increased the rate of return for several projects and improved financing terms via public banks. Mantega in the past has been critical of private-sector banks for not lowering their lending rates at a faster pace as the economy struggles to recover.

Silveira said that the government will create a $4.5 billion infrastructure guarantee fund to reduce risks for the banks financing the projects.

After a decade of red-hot economic growth fueled by a consumption boom, Brazil is feeling the effects of years of anemic investment that crippled infrastructure and dragged down productivity.

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