Brazil Weighs R$2 Billion Boost to FGI to Free Up Credit for Small Firms

Overview

• Reports published Wednesday by O Globo, Valor and O Antagonista said the government is studying an injection of up to R$2 billion into the FGI to restart lending to smaller businesses.
• Finance Minister Dario Durigan said the goal is to let companies and families swap costly debts for loans with lower rates and longer terms, with measures to be announced once the design is ready.
• The plan would run through the Peac program and focus on micro, small and mid-sized firms, including those with up to R$300 million in yearly revenue.
• The FGI works as a public backstop that covers part of a loan if a borrower defaults, which reduces banks’ risk and can lower the interest charged on new credit.
• Changes under review include loan maturities of up to ten years, higher guarantee caps per bank, lower fees, permission to use guaranteed credit to pay old debts, and possible funding from FGTS money or about R$10.5 billion in unclaimed bank balances, with officials also discussing support for a separate household guarantee fund.