Brazil Bank Said to Lose $2 Billion on Junk-Rated Loans

Brazil's national development bank lost out on an estimated $2 billion by setting interest rates too low on loans to junk-rated countries and builders facing corruption allegations, said the federal prosecutor leading an investigation into the lender.

The prosecutor, who is assigned to Brazil’s budget watchdog, said the losses are tied to $12 billion of loans from a workers fund that the state bank known as BNDES shouldn’t have made because the rates trailed inflation. More than two-thirds of that cash funded projects from Angola to Venezuela by builder Odebrecht SA, whose chief executive officer was indicted this week as part of a separate corruption probe at state-run Petroleo Brasileiro SA.