Italian companies in Brazil: Banking system and funding lines

Jun 24, 2020

For Italian companies in Brazil, it is important to talk about financing and, for this, it is necessary to know a little more about the banking system.

The Brazilian banking sector is made up of a National Economic and Social Development bank – BNDES, and most importantly of five large banking groups, two of which are from the state, in addition, there are some state incentive institutions and medium / small banks more intended for investment.

The entire system is controlled by Banco Central do Brazil, which regulates the activities of banks, protects the financial health of the whole country and exercises the monopoly of the monetary issue.

The Brazilian banking system is safe, banks assets are liable, and they always invest in technology, IT systems and software. It pays the employees fairly and motivates them through incentives. All this efficiency, however, translates into high costs, which transferred to users. The banking system also in consideration of its oligopolistic character, is therefore expensive.

A company that intends to invest in Brazil must contact a Brazilian bank or a foreign bank present on the market, which in any case is regulated by the Central Bank of Brazil.

An Italian entrepreneur looking for direct contact with the Brazilian bank will face serious difficulties, especially concerning access to credit, unfortunately, despite the heavy investment in technologies, the Brazilian banks are still not prepared to treat the subject who have as a partner a foreign natural or legal person.

Having support from specialized consultants for the creation of a relationship of trust with local banks or for structuring lines of financing is a system of facilitation in contacts with local banking realities.

Loans directed by Brazilian commercial banks have a high cost that turns on average between 5.5 to 12% per year, this rate difference is due to the relationship that a company has with the bank. Due to the high cost, an SME must seek access to credit from state-owned banks that have incentive lines. Take as an example the state of São Paulo which has the Desenvolve São Paulo bank with credit lines for innovation, projects, machinery/technology, among others, with a duration of up to 10 years and rates that can vary between 2.5 at 4% a.p.r.

In addition, for a company that sells high-tech machinery, it is possible to access FINAME, a credit intended for the end customer to purchase high-tech machinery disbursed by BNDES after obeying the accreditation needs of the manufacturer of this machinery. This is undoubtedly the first of the investments in which an SME will need support from specialized consultants to gain access.

Relief from Italy with subsidized loans to Italian companies in Brazil:

  • Facilitated financing up to € 2.5m to be repaid at 0.067% in 6 years for the opening of new commercial premises (for new is meant not earlier than 12 months) in non-EU countries (offices, showrooms, flagships, shops, warehouses) also through exclusive agreements with local distributors or expansion/support of already operational offices + short-term lost fund.
  • Calmed financing with MCC guarantees up to 90% at 6 years notwithstanding all state aid up to € 5,555,000
  •  7/8-year alternative financing with institutional investors (CDP) and without central risk reporting.
  • Financing of 400,000 euro at 0.067% (first two of amortization equal to 0.67%) to be repaid in 6 years as an SME without having to present any project + short-term lost fund.

There are also measures that provide these contributions without guarantees from the Italian parent company, often with a loss:

  • Feasibility studies
  • E-Commerce Development
  • Entering a Temporary Export Manager in the company
  • Opening of Commercial Facilities
  • Technical Support Programs
  • Export strengthening (only for SMEs)

We at GM Venture will be at your disposal to clarify and structure the credit lines relating to your reality. We are specialists in Italian companies in Brazil and we can be your ideal partner for this moment.

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