Brazil's Government Shelves Plan To Buy Stakes In Construction Cos
Thursday December 4th, 2008 / 15h58
SAO PAULO -(Dow Jones)- Brazil's government has ditched a plan to use local savings bank Caixa Economico Federal to buy stakes in credit-starved construction and real-estate companies, a construction company representative said Thursday. Caixa told industry leaders that aid to the real-estate industry will come via a 3-billion-Brazilian-real ($1.2 billion) credit line for working capital, according to Paulo Safady Simao, president of the Brazilian Construction Industry Chamber, or CBIC. Many of Brazil's real-estate firms went public during the boom in initial public offerings in 2005 and 2006 and used the funds to buy lots in the expectation that demand would continue to grow at an explosive pace over the coming years. However, these companies, which include Gafisa SA (GFAS) and Rossi Residencial SA (RSRZY), need to raise capital to develop projects and the closure of international credit markets to Brazilian companies has frustrated these plans. As a major employer, the government of President Luiz Inacio Lula da Silva identified the construction sector as one of the key areas being affected by the credit crunch. In October, CaixaPar, the investment branch of the bank, was authorized to take stakes in real-estate companies, which rely heavily on credit. However, the companies were concerned that Caixa would gain disproportionate influence in the sector if it bought a wide range of stakes. "We see this announcement as a positive sign that Caixa does not want to buy construction companies," said Simao Caixa is the principal mortgage finance agent in Brazil's nascent housing credit industry. Under the new rules, Caixa could still buy stakes but only via investment banks. The government also has sought to help the automotive industry and banks. -By Alastair Stewart, Dow Jones Newswires; 5511 2847-4520; alastair.stewart@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=G8rN%2BJs%2FXaaSgxy4%2FPCYtg%3D%3D. You can use this link on the day this article is published and the following day.
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