Brazil Real May Gain to 1.9 Per Dollar, Coutinho Says

By Laura Cassano and Joshua Goodman

Oct. 12 (Bloomberg) -- Brazil's currency may strengthen to about 1.9 per dollar in the coming weeks, a level that will still allow the country's exporters to remain competitive, said Luciano Coutinho, president of Brazil's national development bank.

Bndes, as the Rio de Janeiro-based bank is known, is unlikely to sell bonds internationally for the next two years because borrowing costs are ``unacceptably high,'' Coutinho said today in an interview in Washington with Bloomberg Television.

``Earlier than people expect, the exchange rate will return to a level that won't be as exaggeratedly high as it was in the first half of the year, but won't be at current levels either,'' said Coutinho, who was in Washington for the International Monetary Fund's annual meetings.

Brazil's central bank last week sold dollars for the first time in five years as investor flight from emerging markets helped push the real to its lowest level in more than two years. The real closed Oct. 10 at 2.313 to the dollar, and has fallen 22.7 percent in the past month, more than all 16 major currencies tracked by Bloomberg.

Coutinho said the currency will stabilize in a few weeks, after government measures to boost credit lines to exporters take effect and problems Brazilian companies face from derivatives losses subside.

Bndes, Brazil's largest corporate lender, raised $1 billion in international capital markets in May. The yield on the bank's bond due in 2018 has soared in the past month, to 11.123 percent on Oct. 10 from 6.649 percent on Sept. 10.



Plans for a second bond sale in October were put on hold as market conditions worsened, Agencia Estado reported.

`Drought Conditions'

``It makes no sense to go to a market in drought conditions and with credit shrinking globally,'' Coutinho said.

Coutinho is traveling to Japan this week to begin negotiations for a loan from the Japanese Bank for International Cooperation, part of an effort to raise 3 billion reais ($1.3 billion) next year from multilateral lenders. The Inter-American Development Bank announced a 20-year, $1 billion loan to Bndes on Oct. 10.

The Bndes is looking beyond Brazil for financing so it can satisfy surging loan demand at a time when credit is drying up and companies such as Petroleo Brasileiro SA and Cia. Vale do Rio Doce are embarking on costly expansions.

Bndes hopes to lend 90 billion reais next year, up from an expected 85 billion reais this year and 65 billion in 2007, Coutinho said. It lent 83 billion reais in the 12 months through September.

Raising Funds

``Bndes faces no difficulty raising sufficient funding in 2009 to lend more than 90 billion reais if it were necessary,'' Coutinho said.

Of the 40 billion reais the bank is trying to raise for next year, about 27.5 billion will come from Brazil's treasury, Coutinho said. Another 7 billion has been promised by the government-mandated FGTS workers' insurance fund.

To contact the reporter on this story: Laura Cassano in Washington at lcassano@bloomberg.net; Joshua Goodman in Washington jgoodman19@bloomberg.net