Brazil must do more to cap real’s rise – BNDES chief

* Government should “intensify” efforts on real -BNDES chief

* BNDES has not tapped $800 mln credit line from China bank

BEIJING, April 12 (Reuters) – Brazil must do more to prevent
the real from strengthening because the surging currency could
deal a blow to the economy, the head of state development bank
BNDES said on Tuesday.

With Brazilian President Dilma Rousseff visiting Beijing and
expected to voice concerns about how cheap Chinese imports have
hurt Brazilian industry, BNDES President Luciano Coutinho said
the South American power should look to itself for solutions
rather than blame China.

For a start, the government needed to work harder to cap the
real’s gains, he told Reuters in an interview.

“We have to utilise our available tools to mitigate
excessive appreciation,” he said. “I think the Brazilian central
bank and the ministry of finance are trying do this and I think
they should intensify this kind of action in order to prevent
excessive appreciation.”

The real climbed last week to its strongest
level against the dollar since August 2008 after the market
shrugged aside the government’s latest move to tax investors who
are chasing Brazil’s double-digit yields.

Brazil’s finance minister has tried to halt the currency’s
relentless rise with a series of measures, including taxes on
foreign loans and other capital controls, but his threat of
further action seems to have lost its sting. [ID:nN08190712]

While it was inevitable that investment would stream into a
fast-developing economy such as Brazil, the government should
erect stronger barriers against unwanted hot money, Coutinho
said.

“We’ve got to select the benign capital inflows that help to
develop the Brazilian economy from speculative short-term
activities that are in a way harmful in that they exaggerate the
trend towards currency appreciation,” he said.

Other steps to improve Brazil’s competitiveness would
include investment in logistics and the promotion of innovation,
he said.

Rio de Janeiro-based BNDES is Brazil’s main source of
long-term corporate loans. Former President Luiz Inacio Lula da
Silva pumped a record 180 billion reais into BNDES at the height
of the 2008-2009 financial crisis to take up the slack left by
private lenders when credit markets froze.

Also in 2009, BNDES received an $800 million credit line
from China Development Bank (CDB), its Chinese counterpart. But
Coutinho said the Brazilian state bank had never tapped it.

“That $800 million loan has not been contracted in fact,
because its conditions were not the ideal conditions we need. We
need very long durations,” he said. “We had alternative sources
of funding.”

Coutinho added that the Chinese offer was seen as a friendly
gesture and that discussions were continuing about financing
terms and projects for any loan from CDB.

(Reporting by Simon Rabinovitch; Editing by Kim Coghill)

Brazil must do more to cap real’s rise – BNDES chief