The planned changes to the way that Brazil’s state development bank, BNDES, will set interest rates on its loans have passed under the radar but the macroeconomic effects could be significant. We estimate that, all other things being equal, the reforms could allow the Selic policy rate to be set around 100bp lower over the economic cycle. They could also cut the annual cost of government funding of BNDES by up to 0.25% of GDP.
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