Brazilian Development Bank Long Term Interest Rate TJLP

The Long Term Rate (TLP), formerly called the Long-Term Interest Rate (TJLP), became effective as of January 1, 2018. It is the main financing rate of the BNDES — National Bank for Economic and Social Development. The current TLP is defined every three months based on the inflation target for the year.

The government may grant smaller interest rates to stimulate certain businesses and sectors. But for that to happen, it is necessary to go through the public budget, that is, the old TJLP needed the approval of the Congress. Due to this political issue and in order to be free of governmental interference, the rate was reformulated by BNDES, which will gradually become equal to the market interest rate until 2023. In this way, it will be an interest rate within market standards.

Although it is an interest rate, TLP has some advantages for investors and for those who acquire BNDES financing. The real interest rate is fixed from the beginning to the end of the financing, causing less instability in financing costs and security to creditors, giving certainty about the future real rate. As it is fixed, there is less distrust of TLP and it serves as support for the targets system. Even if TLP is influenced by the variation of IPCA (National Consumer Price Index) and this may interfere with the value of the financing, any corrections in the sales prices of the products and services are minimized, adjusting to the reality of the market.

Because it is an interest rate for financing purposes of the National Development Bank (BNDES), the increase in the TLP rate is unfavorable to the economy and may weaken the Brazilian real.