Brazil's Guarantee Fund for Investments and Emergency Credit Access Program (FGI-PEAC), alongside lines like PRONAMPE and BNDES Automático, were born from a correct diagnosis: in periods of economic stress, credit for small and medium-sized companies dries up first. But in the contractual practice seen in forensic audits, a question forces itself: if the bank's risk dropped to a fraction of the original, why didn't the price charged to the borrower drop by the same proportion?
In this analysis
A program designed to help, reviewed under suspicion
Brazil's Guarantee Fund for Investments and Emergency Credit Access Program (FGI-PEAC), alongside lines like PRONAMPE and BNDES Automático, were born from a correct diagnosis: in periods of economic stress, credit for small and medium-sized companies dries up first, because the risk the bank perceives rises faster than the borrower's ability to pay falls. The solution designed by the Treasury and BNDES was clever — the state, through a guarantee fund, absorbs up to 80% of the credit risk on each operation, sharply reducing the bank's exposure and, in theory, enabling lower rates and broader access to credit.
In institutional-design theory, this works. In the contractual practice seen in forensic audits, a question forces itself: if the bank's risk dropped to a fraction of the original, why didn't the price charged to the borrower drop by the same proportion — and why, in many cases, does the bank still demand additional collateral as if the risk had never been mitigated?
What the forensic sample reveals
Of the twenty business-credit operations reviewed technically over the past few months, half involve publicly-guaranteed or fomento credit programs — FGI-PEAC, PRONAMPE or BNDES Automático. That volume alone indicates that the misuse of these programs isn't an isolated incident, but a pattern that cuts across different lending institutions and different product designs.
The rate charged ignores the risk mitigation. In virtually every FGI-PEAC or BNDES-guaranteed case reviewed, the contracted effective rate was between 68% and 233% above the average rate the Central Bank itself reports for equivalent directed-credit lines — even with 80% of the credit risk already covered by the public fund.
Collateral stacking with no corresponding discount. In at least four operations in the sample, the bank stacked unlimited personal guarantees from the partners — and sometimes additional real collateral or receivables assignment far above the debt value — on top of the fund's 80% coverage, in one case pushing combined risk coverage to nearly 180%, with no rate reduction at all.
The grace period as a silent accumulation window. Across nearly the entire fomento-linked sample, the contractual grace period functions, in practice, as an interest-capitalization window. The outstanding balance grows before the first installment is even paid — in some cases by tens of thousands of reais — without this being made clear to the borrower at signing.
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Institutional design versus contractual practice
It's important to separate two things critics easily conflate. FGI-PEAC's, PRONAMPE's and BNDES Automático's design, as public policy, is technically sound: partial credit-guarantee mechanisms exist in virtually every developed economy and serve to unlock credit supply during periods of rationing. The problem identified in the forensic sample isn't the fund's design — it's the gap between the program's rule and the pricing and structuring practice of a relevant share of the banking market operating these lines.
That gap has a simple technical name: assistance-spread capture. The bank reduces its own risk through the public fund but doesn't pass that reduction on to the borrower — capturing, for itself, the benefit the public policy's design intended for the company. Combined with redundant collateral and a capitalizing grace period, the result is a product that, under the "emergency fomento credit" label, behaves financially like free-market-risk credit.
What an SME should check before signing
Given this pattern, some objective checks are possible even without deep technical expertise:
- Compare the offered rate with the program's own regulatory ceiling — not the free-market rate.
- Explicitly ask what share of the risk is covered by the guarantee fund and whether that's already reflected in the rate.
- Add up every collateral requirement — personal, real, fiduciary assignment — and question whether it makes sense given a risk already cut to 20% of the operation's value.
- Simulate the outstanding balance at the end of the grace period: if it's higher than the amount disbursed, that should be clear, in numbers, before signing.
The fund guarantees the bank. It falls to the company itself — and to closer oversight of how these lines are contractually structured — to make sure the protection also reaches the party the program was created to help.
This article is part of a series on technical pathologies in business credit operations, based on expert opinions prepared by the author. Individual cases are treated in aggregate and anonymized form, with no identification of the companies or individuals involved.
Frequently asked questions
What is FGI-PEAC and how does it work?
FGI-PEAC (Guarantee Fund for Investments — Emergency Credit Access Program) is a mechanism where the Brazilian state absorbs up to 80% of the default risk on a credit operation granted to a small or medium-sized company, reducing the lending bank's exposure and, in theory, enabling lower rates.
Why does the rate on an FGI-PEAC-backed credit line often stay high?
Because, in the forensic practice observed, the bank absorbs the risk-reduction benefit the public fund provides, but does not pass that reduction on to the price charged to the borrower — an assistance-spread capture pattern that repeats across different institutions.
Is it normal to require unlimited personal guarantees even with FGI-PEAC covering 80% of the risk?
It isn't an automatic requirement of the program, but it shows up frequently in contractual practice: in at least four operations reviewed, the bank stacked unlimited personal guarantees and additional real collateral on top of the fund's 80% coverage, pushing combined risk coverage above 100% with no corresponding rate discount.
What should an SME check before signing a publicly-guaranteed credit line?
Compare the offered rate with the program's own regulatory ceiling (not the free-market rate), ask what share of the risk is covered by the guarantee fund, add up every collateral requirement, and simulate the outstanding balance at the end of the grace period before signing.
Dr. Lincoln Sposito
Specialist in banking audits and financial forensics, combining the statistical rigor of data science with the analysis of banking-system architectures to dismantle predatory charges against SMEs. Learn more about the expert →