The Banco do Brasil (BB) has issued a statement to defense companies, informing them that it will cease financing projects. Henceforth, the responsibility for allocating the corresponding budgetary allocations to fulfill ongoing projects and ensuring planned exports will fall on the Brazilian government.
This new policy by BB aligns with other private banks that, for governance reasons, choose not to invest or provide financing to companies involved in the manufacturing of weapons, equipment, or related vehicles. The decision has had a significant impact on the government, which must now assess how to address the reduction in defense sector financing.
One alternative being considered is the expansion of the Proex (Export Financing Program) to support the sector, which currently represents 4% of the GDP. Through this program, companies not only secure financing but also provide the required guarantees to foreign buyers.
The Proex program enables companies to obtain not only financing but also the guarantees required by foreign buyers. Regarding this matter, BB was the only bank still negotiating export guarantees. These guarantees function similarly to insurance, covering approximately 30% of the export value. In case of any issues, the buyer can invoke the guarantee and be reimbursed by paying in advance, a common practice in such transactions.
A specific case affected by BB’s decision is the company Mac Jee, which has around $500 million in export negotiations with the United States, United Arab Emirates, Saudi Arabia, Bulgaria, among other countries. The lack of funds for guarantees jeopardizes the company, exposing it to the risk of losing contracts and even potential bankruptcy due to the debt that would be incurred with BB.
Similar situations are faced by companies CBC, Mectron, and Avibrás. The Ministry of Development, Industry, and Commerce (Mdic) stated in a release that they are actively seeking solutions to ensure the maintenance and strengthening of the Brazilian industry. This decision particularly impacts companies working with foreign clients, a segment of the Brazilian defense industry that was in full expansion.
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