Lula Drums Up China Cash

Brazil’s Petrobras and BNDES have signed loans with the China Development Bank (CDB), coinciding with President Lula’s 3 day trip to China. BNDES has signed a letter of intent to borrow up to $800m from the CDB. Final details will be worked out at a later date, according to a BNDES official, with proceeds going towards lending that advances the interests of both Brazil and China. Fellow quasi-sovereign Petrobras has also finalized a long-awaited 10-year $10bn bilateral financing agreement with CDB, Petrobras says. The loan package will be used to finance the company’s $175bn 5-year investment plan, and includes the financing of purchases of goods and services from Chinese companies. The agreement also provides for increased oil exports from Brazil to China, though last month Petrobras confirmed that future oil output would not serve as collateral for the loans. A Petrobras spokeswoman declines to state the cost of the loan package. “The $10bn from China is only a fraction of the amount needed for Petrobras’ investment plans. Brazil is also in discussions with Japan, the US, and others for financing,” says Standard Chartered. The shop adds that talk of dropping the dollar in favor of using local currency to transact business between Brazil and China is “more political than anything else.”