August 23, 2017 / 5:01 PM / in a year

UPDATE 1-Brazil congressional committee approves new BNDES lending benchmark

(Adds market reaction, background)

By Silvio Cascione

BRASILIA, Aug 23 (Reuters) - A Brazilian congressional committee on Wednesday approved the creation of a market-based benchmark for state lender BNDES, readying the proposal for a final vote by next week in a major victory for President Michel Temer.

Brazil’s currency strengthened nearly 1 percent as the vote signaled Temer’s coalition remained capable of approving key economic measures despite rifts caused by a lingering corruption scandal and the imminence of next year’s election campaign.

After weeks of obstruction attempts by the opposition, the committee voted 17-6 to approve the creation of the so-called TLP interest rate for BNDES lending.

The proposal is one of Temer’s top priorities to fix the country’s long-term public finances and pave the way for lower interest rates as it reduces the scope for discretionary subsidies through BNDES lending.

BNDES, the main provider of long-term corporate loans in Brazil, has offered cheap loans for decades to boost economic growth and create jobs.

Rising public debt and increased scrutiny of the bank’s lending policies after corruption scandals have led policymakers to propose changes, such as the new market-based interest rate benchmark, to boost transparency.

Temer is also seeking congressional support for softened budget targets for 2017 and 2018, a major overhaul of pension rules, and has recently floated the idea of changing the country’s presidential regime to a parliamentary system.

The new BNDES benchmark is ready to be voted on by the lower house later on Wednesday and by the Senate next week, Romero Jucá, leader of the government in the Senate told journalists. The measure requires legislative approval or it will it expire on Sept. 7. (Reporting by Silvio Cascione; Editing by Meredith Mazzilli)

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