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Brazilian Tax Crisis Creates Conflict Between BNDES and Government

01/12/2018 - 10h38

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FLAVIA LIMA
FROM SÃO PAULO
LUCAS VETTORAZZO
FROM RIO

The government of Brazilian president Michel Temer (MDB) and the National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social - BNDES) cannot see eye to eye regarding the country's tax situation, an equation which does not seem to add up.

The Worker Support Fund (Fundo de Amparo ao Trabalhador - FAT) has requested the bank to return R$ 20 billion (US$ 6.22 billion) to cover welfare and allowance costs.

BNDES has also been requested to return R$ 130 billion (US$ 40 billion) to National Treasury in order to comply with the so-called "golden rule".

It prevents the Federal Government from raising funds from loans in the market at volumes which exceed amounts to be invested.

Carlos Thadeu de Freitas, officer of the financial and international area of BNDES, says it is possible to pay the R$ 130 billion (US$ 40 billion) in the second semester.

In order to do that, however, bank's loans could not exceed R$ 90 billion (US$ 30 billion), and FAT funds would not be returned. Otherwise, the amount returned to Treasury would be lower.

According to one of the bank's executives, the government has dropped a "smoke bomb". In refusing to pay its debt, BNDES would also become responsible for the tax crisis.

"Our tax situation is one of the worst we have ever faced", states Felipe Salto, executive director of the Senate's Independent Tax Institution.

According to Salto, deficit is stable, but public debt is still substantial and increasing: "It's high time we faced this issue", he said.

Translated by ANA BEATRIZ DEMARIA

Read the article in the original language

Nacho Doce/Reuters
A man walks past the logo of Brazilian Development Bank (BNDES) at the entrance of its headquarters in Rio de Janeiro
A man walks past the logo of Brazilian Development Bank (BNDES) at the entrance of its headquarters in Rio de Janeiro

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