Brazilian financing of projects abroad flawed but legal, says court

The Federal Accounts Court, a watchdog of public spending, ruled that managers and technicians of Brazil’s BNDES federal development bank did not violate the law when they approved a series of financing operations for the export of goods and services to various countries during the first two terms of Luiz Inácio Lula da Silva as president (2003-2010) and Dilma Rousseff’s first term in office (2011-2014).

Conversely, the court made recommendations to correct flaws found in these processes. The list includes the requirement of a technical and economic-financial feasibility study of projects before granting credit, and implementing databases to monitor the information companies provide.

One of the cases evaluated questioned the legality of 67 loans granted between 2005 and 2014. They were for road construction and totaled USD 2.1 billion — most for works in Angola, but also in the Dominican Republic, Ghana, Guatemala, and Honduras.

Brazilian construction companies were financed by the Brazilian bank to carry out work abroad. The countries that contracted the work were responsible for paying the loans. 

Two members of the accounts court voted to fine and punish BNDES officials responsible for these operations, including Luciano Coutinho, the bank’s former head.

The rapporteur of the case said that about half of the sums had been misused and suggested the possibility of corruption among public workers, although the court found no evidence to that effect. Some of the biggest Brazilian construction firms were later convicted for corruption cases in the high-profile Operation Car Wash, a now-defunct anti-corruption task force.

A 6-2 majority, however, found that no gross negligence or criminal intent had been proven. They highlighted that, at the time the decisions were made, there were no rules preventing what managers and technicians authorized. 

Another case concluded on March 5 concerned construction work in Cuba. A third, shelved by a unanimous decision, involved the financing of projects in countries such as Argentina and Venezuela.

At the end of 2023, the federal government introduced a bill to Congress creating a regulatory framework for BNDES credit operations for the export of goods and services. BNDES representatives have publicly guaranteed that the institution will not carry out any service export operations until the bill is approved.

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