By Aldo Musacchio and Sergio Lazzarini
On May 28 Márcio Garcia posted an article here arguing that there is scant evidence of the impact of the BNDES, the government-owned development bank, on the Brazilian economy. He provided a chart showing that, in the last decade, the bank has substantially expanded its credit activity while country-level investment to GDP has barely moved above 18 per cent. Luiz Carlos Ferraz of the BNDES replied on June 2 with a different chart depicting an apparent association between investment and BNDES disbursements. Ferraz wrote that “evaluations, assessments, and opinions must be made on technically sound analysis.” In this post we would like to contribute to this virtual debate by presenting some results of our own work, summarised in our latest book, Reinventing State Capitalism.
The BNDES, Brazil’s government-owned development bank, is a much-maligned institution. Many would say, rightly so: it lends R$190bn ($85bn) a year of taxpayers’ money at heavily-subsidised negative real interest rates, often to big companies that critics say should be funding themselves on international markets at the same cost as their competitors. This makes it, in the words of one beyondbrics reader, a classic example of “the Brazilian public getting ripped off by rent seeking behaviour made possible by the state.”
But is this fair? The BNDES, after all, is a vital source of corporate funding, often for the most vulnerable recipients. Maybe it is a symptom, rather than a cause, of the distortions in Brazil’s economy.
By João Carlos Ferraz of the BNDES
The debate about Brazilian development has reached a consensus: investment is the key to a rebound. This is an interesting and very welcome phenomenon as economic analysts very seldom come to similar conclusions. However, when discussing development financing and the contribution of the country’s development bank, the BNDES, this debate has been largely characterised by shallow analysis, with extensive use of expressions with minimum substance, yet very conclusive in defining a negative role for the BNDES in pulling investment upwards. This has resulted in unproductive and even unfair attacks on one of the country’s institutions that has most effectively contributed to Brazil’s development.
The BNDES, Brazil’s government-owned development bank, will open its first Africa office on Friday in South Africa’s commercial capital of Johannesburg. Only the third overseas office for the Banco Nacional de Desenvolvimento Econômico e Social after Montevideo and London, it signals the ever-growing ties between Latin America’s largest economy and the world’s fastest growing continent. Its goal is simple – to push Brazilian companies deeper into Africa.
As hundreds of thousands of Brazilians take to the streets, Eike Batista’s investors have been staging their own protests in the market over the past few weeks.
The latest disappointment came on Wednesday night when the Brazilian billionaire cancelled plans to delist his Colombian coal business, CCX. It was the last straw for the company’s investors, who abandoned the stock on Thursday, causing the shares to slump 37 per cent to an all-time low.
Has Eike Batista’s “X” group of companies become too big to fail?
Judging by the amount of help that “Brazil Inc” has been throwing his way, one would be forgiven for thinking so. The latest to lend a helping hand? BNDES, Brazil’s development bank, which on Thursday approved a 10-year, R$935m ($464.6m) loan to Batista’s mining group, MMX Mineracao e Metalicos.
If anyone was worried by Moody’s downgrade of BNDES and Caixa Econômica, the banks themselves seemed unruffled.
Is the Brazilian government robbing Peter to pay Paul?
That may sound a bit harsh but it is what Moody’s seems to suggest with its downgrade of BNDES and Caixa Econômica on Thursday.
The BNDES, Brazil’s government-owned development bank, lent more than it set out to last year, as loan requests and loans approved reached “levels without precedent in the history of Brazil”, as the bank itself put it.
Its triumphal tone will grate with those who believe the BNDES should be shrinking, not expanding. This applies even to Luciano Coutinho, the bank’s president, who told the FT two years ago the BNDES should be “crowding in” the private sector – rather than, as it is often accused of doing, crowding it out.
The Batista family, controlling shareholders of JBS, the world’s largest meat producer, has a lot to celebrate this week.
The family is expanding into paper and pulp through a new unit of its J&F holding company, Eldorado Celulose and Papel. The company’s new plant, which it claims will be the world’s largest “single-line” pulp mill, is due to start operation this week with a total investment of R$6.08bn.
Brazilians are generally not big fans of DIY, but when it comes to the economy, the government is always keen to resort to some good old Do-It-Yourself.
And their favourite tool? BNDES – the super-state bank with a loan book about four times bigger than the World Bank’s.
Brazil’s Treasury Secretary Arno Augustin has told the country’s Valor Econômico newspaper that the government is considering pumping cash into BNDES for the fifth straight year.