Dilma Begs With One Hand, Gives to Castro With Other

Sunday, February 9, 2014
Excerpt by Mary Anastasia O'Grady in The Wall Street Journal:

Brazil Tries to Borrow Its Way to Prosperity

Brazilian President Dilma Rousseff traveled to Davos, Switzerland, last month with a message for international investors: Brazil is about to become more competitive. "I want to emphasize that we will not be weak on inflation," Mrs. Rousseff said. "Fiscal responsibility is a basic principle of our vision for economic and social development."

On the way home, Mrs. Rousseff stopped in Cuba, where she inadvertently signaled the opposite. The Brazilian government's development bank—known by its Portuguese initials BNDES—has dumped almost $700 million in subsidized credit into Cuba to finance the renovation of the Port of Mariel. On Jan. 27, Mrs. Rousseff cut a ribbon at the project and promised another $200 million in BNDES credits for a second phase of construction. On the same day the Brazilian newspaper Valor Economico reported that Cuba is now the third top destination for BNDES loans.

What a destination. Since 1959, Castro Inc. has racked up unpaid foreign debt and other claims totaling nearly $75 billion—including $35 billion owed to the Paris Club. Cuba is one of the world's most notorious deadbeats, and the Cuban economy is moribund. So it would seem a high-risk venture to pour credit into the Castro boys' pockets.

But the BNDES handouts are not only about Cuba. They're about the government's longtime aspiration to become a global industrial giant by directing credit. Odebrecht, the large Brazilian construction company that has a contract to modernize the Port of Mariel, is the big beneficiary of BNDES's subsidized loan. As Valor Economico noted, Odebrecht "is feasting in Cuba," where it also has been contracted to overhaul Havana airports with subsidized loans from BNDES.

Subsidizing Brazilian industries is what BNDES exists to do. But the development bank's aggressive lending is at odds with Mrs. Rousseff's claim that Brazil is about to become a serious country.