It is reported that the National Monetary Council, which sets the country guidelines for credit, monetary and exchange policies recently allowed BNDES to increase loans to iron-ore miner Vale above a limit of 25% of the lender loan book.

The council also extended the no limit loan policy for Brazilian state led oil giant Petrobras and state controlled power company Eletrobras until June 2015. The measure was due to expire later this year. The credit move comes at a time when uncertainty over the health of the global economy has increased the cost of credit for some corporate borrowers.

Mr Sergio Odilon dos Anjos the central bank head of regulation said “Given the BNDES role as a development bank and the strategic importance of these companies the council decided to allow BNDES to surpass the credit limit for a longer period of time for Petrobras and Eletrobras and include Vale.”

Rousseff has moved with a barrage of fiscal and monetary stimulus to support an economy that has flirted with recession since mid-2011. Earlier this week she announced a new round of tax breaks to bolster the automobile industry in the world's sixth largest economy.

A credit crunch related to a potential Greek debt default and Euro exit could spoil her plans to revive the economy. A slowing Chinese economy is also threatening the price of key Brazilian exports like iron ore, oil and other commodities needed to pay corporate debts.

The BNDES, the hemisphere's largest development bank, had a key role in providing Brazilian companies with ample credit during the 2008-2009 global financial crisis.

Tight lending conditions have forced Vale to review projects. The company decided to sell some non-iron assets like coal and oil projects in Colombia and Brazil.

Source - Merco Press

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