Financing Development: the case of BNDES
International Economic Association / World Bank Roundtable
New Thinking on Industrial Policy
22‐23 May 2012
João Carlos Ferraz
Vice President
Arguments
A Development Bank should be:
‐ neither the vanguard or rearguard but the co‐guard of sustainable development
‐ an instrument to:
‐ fill gaps, fix failures, induce externalities
‐ foster an innovative, sustainable long term financing industry
‐ an agent of systemic stability
‐ a competent institution in appropriating and distributing (to society, via the State) benefits of its intervention
2
The Brazilian economy: trends
9Social and economic inclusion
9Macroeconomic stability
9Investment expanding ahead of GDP growth
9Challenges: innovation capabilities and efficiency of private and public sectors
3
Industrial Policies since 2004
• PITCE (2004-2007): Industrial, Technology and Trade
Policy
– Foster technology based sectors
– The return of Phoenix
• PDP (2008-2010): Productive Development Policy
– Innovate and invest to sustain growth
– Riding favourable winds and the storm
• PBM (2011-2014): Plano Brasil Maior
– Innovate to compete; compete to grow
– Against a hostile environment, aggregate value through
innovation
• Long term policy but adaptable to face unexpected challenges
• Industrial policy: a team player of development policies
4
BNDES in a nutshell
‐ Since 1952, BNDES flexibly adapted to different stages of Brazil's development. It has always had the means –
political influence, resources and instruments‐ for accomplishing mandates ‐ Now, the economic horizon is extending. Investment may lead the way. Long term financing is a decisive factor & BNDES will be present. But, two challenges ahead:
‐ Untangling and paving the way for the private long term financing industry to “crowd in”.
‐ BNDES evolving towards: complex financing for infrastructure; support for “intangibles”; innovative instruments for widening access
5
BNDES role in long term financing and as a counter cyclical agent
BNDES has a very prominent role in long term financing in Brazil
Growth of disbursements for capital goods acquisition and GFFC (3Q08 = 100) 200
180
160
140
120
100
PSI begins
Credit for Companies (maturity >= 3 years)
80
60
3o tri/08
4o tri/08
1o tri/09
2o tri/09
3o tri/09
Finame Disbursements
72,4%
6,1%
BNDES
CAIXA FEDERAL
B. BRASIL
2o tri/10
3o tri/10
GFFC
Investment Support Program in which interest rates were reduced by an equalization program of Finance Ministry
Other Banks
Source: Brazilian Central Bank
1o tri/10
PSI
12,8%
8,7%
4o tri/09
Data from Brazilian Central Bank based on banks´ balance sheets – Dec 2011
6
Scale and scope matters
9 Main provider of long-term
financing in Brazil
9 100% state-owned company
under private law
9 Institutional funding
9 2,500 employees
Gross Fixed Capital Formation (GFCF) & BNDES disbursements
(US$ Billion)
500
450
400
90
80
GFCF
70
60
350
50
300
40
250
BNDES disbursement for GFCF (*)
200
150
9 Instruments
100
2001
2002
2003
2004
2005
2006
¾ Direct operations
(*) exc. BNDES Exim; working capital, M&A and Equity Financing.
¾ Indirect operations
27%
¾ Exim
¾ Project finance
¾ Equity investments
2007
2008
2009
2010
10
2011
BNDES contribution to investiment and employment
20%
22,6%
24%
21%
21,7%
14%
18%
10,8%
15%
12,1%
12%
10,1%
10,9%
11,4%
3,5%
9,9%
13,0%
10,5%
3,9%
4,1%
4,4%
12%
10%
7,2%
9%
6%
12,5%
18%
16%
19,7%
Investiments supported by BNDES / Total
national investiment (GFCF)
8%
5,3%
6%
Jobs created ou maintained due to BNDES /
Total formal employment at the end of the year
3%
¾ Grants
20
0
2000
¾ MSME (financing &
guarantee)
30
4%
2%
0%
0%
2003
Source: BNDES
2004
2005
2006
2007
2008
2009
2010
2011
Development financing: food for thought
•
Each nation has its own structure, history & aspirations. Hence, singular institutions. BNDES is a singular institution. But, some features of its “DNA” may serve as “food for thought”:
–
Flexibility: learning and adaptation to change
–
The spirit of serving the public interest
–
Competence to be effective and efficient
–
Team player: instrument to build for the long term
–
Obsession with investment, with development
–
Political leadership – at the institution, in the country
Financing Development: the case of BNDES
May 2012
João Carlos Ferraz
Vice President