SAO PAULO — A leading Brazilian bank will no longer use its own resources to finance defense companies, it announced this week.

Banco do Brasil is a key player for the country’s federal government, which owns half of the business. With assets exceeding $1.4 trillion reals (U.S. $283 billion), the bank plays a significant role in the domestic industry by guaranteeing exports for companies. It is also the second-largest bank in Latin America, according to S&P Global.

“Credit grant decisions are always guided by credit policies and social responsibility,” the bank told Defense News. “In compliance with its internal governance and sustainability instruments, which are recognized as a market benchmark, BB has decided not to contract, with its own resources, new operations for this sector.”

This move affects part of the funds from Proex — a federal government mechanism that provides resources for Brazilian companies exporting goods and services — which is managed by the bank. Part of the money is supplied by Brazil’s National Treasury, and the rest by Banco do Brasil.

“The measure is quite serious,” a chief executive of a defense company told Defense News on the condition of anonymity due to the sensitivity of the topic. “This decision decrees that defense companies on national territory will no longer have the capacity to export.

Financial tools are necessary for exports, the source added, including during “post-shipment” operations, where clients demand guarantees.

“Here, Proex does not act; this guarantee only occurs with Banco do Brasil’s resources,” the executive said. “And often clients demand these guarantees in the initial purchase and sale contracts. Without this, it’s impossible to close contracts. The effect of this measure can be catastrophic.”

The CEO was unable to identify alternative credit options or guarantees for local defense companies.

Defense News contacted three Brazilian defense companies — Mac Jee, Avibras and Mectron — but they declined to comment.

In a statement to Defense News, the Defense Ministry said Minister José Mucio Monteiro met with Banco do Brasil’s president, Tarciana Medeiros, to discuss the issue.

According to the ministry, the bank’s president promised to study a possible expansion of the scope of Proex to meet the credit needs of the defense sector.

The ministry also reported it has worked with BNDES, a Brazilian state development bank, as well as the Ministry of Development, Industry, Commerce and Services.

Pedro Pligher is a Latin America correspondent for Defense News. He has reported on politics, economics and the Brazilian small arms industry.

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