UPDATE 2-Loan requests at Brazil's BNDES down sharply in early 2014

Tue May 27, 2014 5:06pm EDT

(Adds Coutinho's comments on investment outlook)

By Silvio Cascione

BRASILIA May 27 (Reuters) - Loan requests at Brazil's state development bank, BNDES, dropped sharply in the first four months of the year as business confidence sagged, bank President Luciano Coutinho told lawmakers on Tuesday.

But that does not necessarily set a trend for the rest of the year, he said, adding that he expects to see rising investment in coming years as the fundamentals of Brazil's economy remain solid.

Requests for loans fell 19 percent to 57.240 billion reais ($25.58 billion) between January and April, down from 70.886 billion reais in the same period of 2013.

"There has been a drop... which to some extent reflects the increasingly volatile expectations of the private sector," Coutinho said. "It is not possible yet to say that is the trend for the year, but this is the latest picture that we've got."

Coutinho noted that the outlook for investments in Brazil over coming years has improved from late 2013, as the instability due to the tapering of economic stimulus in the United States waned and work on big infrastructure projects sponsored by Brazil's government gained speed.

"Over the past two to three months, the currency has stabilized and there has been greater understanding that we have a well-equipped central bank and inflation has been under control," Coutinho said in his closing remarks before Congress.

Business confidence in Brazil has plummeted to the lowest level since the 2008-09 global financial crisis after a barrage of stimulus measures by President Dilma Rousseff's government failed to revive economic growth but fueled inflation.

After a surprise rebound in late 2013, economists estimate Brazil's economic growth slowed nearly to a halt at the beginning of this year, according to a Reuters poll.

Loan disbursements increased slightly in the first four months of the year to 58.852 billion reais, Coutinho said.

Coutinho reiterated that he expects Brazil's treasury to make gradual transfers by year-end to support lending by BNDES, but he did not specify how much.

($1 = 2.2372 Brazilian reais) (Reporting by Silvio Cascione; Editing by Chris Reese, Peter Galloway and Dan Grebler)

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