CMN reallocates R$1.4 billion for local government credit and New PAC

Starting Monday, the 25th, states, municipalities, and businesses under the New Growth Acceleration Program (New PAC) will be able to borrow an additional R$1.4 billion from the financial system with a federal guarantee. In an extraordinary meeting, the National Monetary Council (CMN) adjusted the sublimits to accommodate local governments.

The total credit that public entities (Union, states, municipalities and state-owned companies) can contract in 2025 remains at R$21.426 billion, a limit established in January.

The reallocations occurred because almost half of the space for new credit operations guaranteed by the Union was consumed.

The changes were as follows:

• expansion of the sublimit for credit operations guaranteed by the Union for states and municipalities: R$7.0 billion to R$7.3 billion;
• expansion of the sublimit for operations guaranteed by the Union in the New Growth Expansion Program (New PAC): R$1.5 billion to R$2.5 billion;
• expansion of the sublimit for operations without a Union guarantee for states and municipalities: R$4.0 billion to R$4.1 billion;
• reduction of the sublimit for operations without Union guarantee in the New PAC: R$2.0 billion to R$1.0 billion;
• reduction of the sublimit for operations with a Union guarantee for Public-Private Partnerships: R$500 million to R$100 million.

Union-guaranteed operations are those in which the National Treasury covers potential defaults. The funds are later recovered through a reduction in mandatory federal government transfers to states and municipalities.

In a statement, the Ministry of Finance explained that more than 60% of the sublimit for New PAC projects with a Union guarantee was loaned and that the leeway in the use of New PAC credit lines without a guarantee allowed the reallocation.

In January of each year, the CMN defines the limit and sublimits for the contracting of credit by public bodies for the following 11 months.

Climate fund

The CMN also approved a resolution clarifying the methodology for calculating interest rates for financing with resources from the National Fund on Climate Change (FNMC). The new wording aligns the methodology with that applied to credit lines from the National Bank for Economic and Social Development (BNDES).

Interest rates are calculated based on the multiplication of the factors corresponding to the remuneration of financial institutions and the remuneration due to the FNMC itself.

The standard was also improved to more accurately distinguish between the charges charged to the borrower to remunerate the Fund and those due to the financial institutions that operate the loans.

Contingency plan

The CMN also regulated R$40 billion in credit lines to help economic sectors affected by the 50% US tariff hike on Brazilian products. As announced earlier this Friday, Brazilian companies that lose more than 5% of their total gross revenue due to the tariffs will have priority access to BNDES credit lines.

The bank announced that it will inject R$10 billion into the aid package, increasing the total credit available to exporters from R$30 billion to R$40 billion. The resolution also defines the interest rates for each type of line, also announced this Friday by BNDES in Rio de Janeiro.

The CMN is a collegiate body chaired by the Minister of Finance, Fernando Haddad, and composed of the president of the Central Bank of Brazil, Gabriel Galípolo, and the Minister of Planning and Budget, Simone Tebet.