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Markets watchdog says Brazil state banks hamper capital markets

SAO PAULO, June 21 (Reuters) - Capital markets activity in Brazil will fail to grow significantly as long as state lenders keep the country's companies hooked on cheap credit, the securities industry watchdog said on Wednesday.

Years of active state meddling in credit markets have led to the crowding-out of debt and stock markets from corporate financing, said Leonardo Pereira, president of the watchdog known as CVM. Since its launch in 1952, state development bank BNDES has been practically Brazil's sole source of long-term corporate credit.

(Reporting by Aluísio Alves; Writing by Guillermo Parra-Bernal; Editing by Bernard Orr)