Brasília – Boosted by the R$ 10 billion bond issue by the Brazilian Development Bank (BNDES), Federal Public Debt rose 2.53% in June. According to figures disclosed recently by the National Treasury, public debt ended last month at R$ 1.970 trillion (US$ 971 billion), against R$ 1.922 trillion (US$ 948 billion) in late May.
In the industry stimulus package launched in April, the government announced the transfer of R$ 45 billion in public bonds to the BNDES. This mechanism has been used to strengthen the bank’s capital, which may expand the financing of national companies. Since 2009, the government of Brazil has injected R$ 245 billion (US$ 121 billion) in the financial institution: R$ 100 billion (US$ 49 billion) in 2009, R$ 80 billion (US$ 39 billion) in 2010, R$ 55 billion (US$ 27 billion) in 2011 and early 2012, and another R$ 10 billion (US$ 5 billion) last month.
The growth was boosted by the incorporation of R$ 13.76 billion (US$ 6.8 billion) in interest rates. The recognition of interest takes place as correction the Treasury promises to pay investors – who loan money so that the government may pay its debt – is gradually incorporated into the value owed. In the case of an investor who purchased a paper for R$ 100, with correction of 12% a year, he will get R$ 964 in 20 years. This difference is incorporated into the public debt monthly.
With public debt, the government borrows funds from investors to cover debt. In exchange, it agrees to pay back the funds with correction, which may be defined in advance, in the case of pre-fixed papers, or may follow variation of the benchmark interest rate, the Selic, inflation or exchange rates.
*Translated by Mark Ament
