Time of adjustments

Change in the rules of PSI/Finame forces manufacturers of heavy machines to offer better financing conditions to ensure new contracts

At the end of the first quarter, there are no more doubts that 2015 will be a challenging year for business deals. More than feeling shattered by the deadlocks that affect the national economy, manufacturers are waiting for the retaking of investments to prevent stopping in production lines and resignations.

A good notice—at least in part—came with the announcement of the new conditions of the Program of Investment Sustaining (PSI/ Finame), still the main way of credit to finance heavy machinery in the country. After months waiting, the National Bank for Economic and Social Development (BNDES) finally released its operation.

To ensure feasible conditions to the plan, the National Monetary Council (CMN) determined changes in the budget and in interest rates. At first, the volume of resources—that exceeded R$ 50 billion in 2014—was reduced to R$ 37 billion for this year. And interest rates increased from 4 to 8 percent to 6.5 to 11 percent per year, depending on the mode of credit and the size of the company. “These measures are aligned with the plan of fiscal adjustment and at the same time are an incentive to investments”, explains Paulo Sérgio Sodré, chief of the Department of Machine and Equipment (Demaq) of the BNDES.

According to him, the need of adjustments and reduction of expenses leaded the National Treasury to close its subsidies to BNDES loans. Faced with these circumstances, the increase in long-term interest rates from 5 to 5.5 percent was inevitable. “This rate is used as base for several lines of BNDES financing, including Finame”, explains him. “Added to the charges of return rate and payment of financial agents, it will cost 12 to 13 percent for the borrower in 2015.”

By the new rules, the maximum financing percent for any good is only 50 percent of the equipment value for large corporations or 70 percent for medium and low-size companies. Maximum time of payment—that was even of 144 months for machine and equipment—was reduced to 120 months with 24 months of grace period. For heavy trucks, the maximum time of payment was reduced from 120 to 72 months, with six months of grace period for large corporations.

DELAY

The delay in the regulation of the new conditions of the program delayed the start of equipment manufacturers’ sales. In addition, the industry had to look for financing alternatives for the part that would not be covered by the subsidies of the PSI/Finame. “Our concern at this moment is to ensure financing conditions to the client and acceleration to the economy”, says Afrânio Chueire, president of Volvo CE Latin America, informing that BNDES participates of 80 percent of company’s sales and that—even as a symptom—the first two months were weak.

With the delay in the definitions and with not so generous interest rates, Volvo CE is already asking for support of Volvo Financial Services, the financial branch of the corporation, to make easy credit and sales. “Approximately 20 percent of sales closed in the year were carried out through the bank. Therefore we had to fit us to the new reality”, emphasizes Chueire.

The government decision of maintaining PSI/Finame lines till December 31 also was a surprise for the market. Rumors said that it would close at the end of July. For Bernardo Fedalto, truck director of Volvo in Brazil, this was an assertive decision, since this program stimulates buyers to renew their vehicle fleet with very attractive interest rates. “The program helped us too much in the last years, more as a support through interest rates compatible with transport applications than as only a crutch for the industry”, remembers the executive, saying that quotations are being asked again. “Even with the adjustments, these are competitive rates if compared to those carried out by the market. In 2007, the market had interest rates similar to those carried out currently. In other words, the year is starting”, jokes him.