Banco do Brazil Trade Finance Guarantee Program

Project Description

MIGA is proposing a Trade Finance Guarantee (TFG) program for Banco do Brasil, under which it would provide up to US$700 million in commitments over a three-year period to support trade-related transactions in Brazil. The TFGs would mitigate the risk of non-payment by Banco do Brasil and apply to multiple loan facilities with various lenders, optimizing the bank's funding strategy. Disbursements under these facilities would have a tenor of up to one year, with MIGA’s maximum exposure at any given time capped at US$700 million.

The short-term financing supported by the Program would seek to support (i) trade financing for Micro, Small and Medium – sized Enterprises (MSMEs), providing financing such as pre-export loans; and (ii) financing of production, purchase of equipment and inputs related to renewable energy, such as biofuels, biomass energy production, solar power, or wind power, included but not limited to the agricultural sector.

The first of these MIGA-covered facilities under this Program would be for up to $400 million in loans supporting trade-related activities. Guarantee holders would include Banco Bilbao Vizcaya Argentaria, S.A, HSBC Bank USA, N.A, Caixa Geral de Depósitos. 

Environmental Categorization 

The MIGA guarantee will support short-term trade-related transactions Trade-related transactions typically pose minimal adverse envirometal and social (‘E&S’) risks and impacts. The Project has been categorized as ‘FI-3’ under MIGA’s Policy on Environmental and Social Sustainability (2013).  For the purposes of the MIGA guarantee, BdB will be required to assess trade transactions against: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in Brazil; and (iii) sector-specific issues in the agriculture sector. 

As a financial intermediary, BdB will be required to comply with Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts and Performance Standard 2 – Labor and Working Conditions. BdB is an existing client; the bank’s E&S risk management procedures and labor policies are in line with MIGA’s standards. For each guaranteed loan, BdB will be responsible for screening the trade transactions against MIGA’s E&S requirements.

Development Impact

Trade financing is essential to the economic health of developing countries as it contributes to their export competitiveness, employment, and growth. The Program will allow Banco do Brasil (‘BdB’) to establish partnerships with various international banks, which will result in increased access to trade finance for MSMEs in Brazil. By supporting MSMEs, the Program will be helping an underserved segment of the population which is key to economic development in the country but faces financing constraints. In addition, the Program will support sustainable production, contributing to climate change mitigation.