BRASILIA (Reuters) - Brazil’s lower house of Congress on Wednesday rejected amendments to a bill that creates a market-based benchmark interest rate for state lender BNDES, leaving the measure ready for a final Senate vote ahead of a Sept. 6 deadline.
The proposal is one of the government’s top priorities to fix long-term public finances and pave the way for lower interest rates, as it reduces the scope for discretionary subsidies through BNDES lending.
While the opposition had tried to obstruct passage for weeks, the vote was a victory for President Michel Temer and suggested his coalition remains capable of approving measures to revive a recession-hit economy.
But economists warned that it was too early to say Temer has the backing to pass proposals requiring a greater majority, such as the overhaul of the pension system, his key plan to control a gaping budget deficit.
The real currency strengthened slightly against the dollar BRL= after the vote, with investors waiting to see whether Congress will approve easier deficit targets sought by the government for this year and next in a session scheduled for later.
National development bank BNDES, the main provider of long-term corporate loans in Brazil, has offered cheap loans for years, including to behemoths such as meatpacker JBS SA (JBSS3.SA), to boost economic growth and create jobs.
The subsidies cost Brazil 240 billion reais ($76.53 billion) between 2007 and 2016, according to government data, and did not avert a deep recession in 2015 and 2016. Mired in a budget crisis, Brazil lost its investment grade rating two years ago.
Industry leaders complained that the new rate will raise lending costs by 3 percentage points and is a bad move at a time when Brazil needs investment to pull out of recession and create jobs to bring down high unemployment.
The plastics industry is highly dependent on long-term BNDES lending and would have to cut investment by 40 percent as a result of the new benchmark, its lobby ABIPLAST’s president José Ricardo Roriz said.
That will delay modernization and hurt their ability to compete with Europe’s plastics industry planning to invest $1.6 trillion and China’s $1.2 trillion over the next 15 years, he said.
Reporting by Anthony Boadle; Editing by Paul Simao and David Gregorio