MNI SOURCES: Brazil Development Bank To Offload Share Holdings

     BRASILIA(MNI) - The incoming head of Brazil's development bank BNDES is

preparing to sell off a large portion of its $27.9 billion share portfolio,

including holdings in companies such as Petrobras, Vale and Eletrobras, as well

as to slash its 2,654-strong payroll as it seeks to return $67.9 billion it owes

to the national government, BNDES officials and financial market sources told

MNI.

     Gustavo Montezano, a 38-year-old engineer who has served as Deputy

Secretary for Privatization and Divestment at the Ministry of Economy and has

worked in commodities trading as well as for investment bank BTG Pactual, is

expected to be sworn in as president of BNDES in the coming days after his

predecessor Joaquim Levy resigned following public criticism by President Jair

Bolsonaro, who wants to use funds returned by BNDES to the government to pay

down public debt.

     Montezano has already received a report prepared by the Ministry of the

Economy laying out plans for sales from its BNDESPar portfolio, which holds

shares worth $13.9 billion in state oil company Petrobras, $4.3 billion in miner

Vale, $2.4 billion in electrical utility Eletrobras, $2.4 billion in food

company JBS and $1.8 billion in pulp and paper company Suzano. Since the

beginning of the 2000s, BNDESPar has produced returns of 413% and is responsible

for approximately 30% of the bank's profits.

     Montezano also plans to reduce the bank's workforce, in a move which will

be backed by officials close to Economy Minister Paulo Guedes.

     Bolsonaro has pushed BNDES to return about $130 billion in government

loans, initially intended to be repaid over 40 years, which were provided from

2003 to 2015 to help provide finance for Brazil's infrastructure and commodities

sectors. Some $62 billion have already been repaid and Bolsanaro wants another

$26 billion later this year.

     Arthur Koblitz, an economist who serves as vice president of the BNDES

Staff Association, said selling off BNDES's share holdings in order to return

money to the state might violate laws on fiscal responsibility.

     "It is not BNDES's responsibility to save the federal government," he told

MNI.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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