Attacks on the BNDES attest to its strategic vocation – 06/22/2023 – André Roncaglia

The BNDES (National Bank for Economic and Social Development) turned 71 last Tuesday (20). After years of shrinkage, the bank is recovering its vocation, under the leadership of Aloizio Mercadante. The reaction from conservative sectors has been negative, as expected.

Anything goes to defame the BNDES and industrial policy: suppress quotes (a “perhaps” at least hides the lack of conviction of the cited authors); using absurd historical comparisons (Marshall Plan); confusing earmarked credit with subsidy; correlating stock of disbursements with aggregate investments (using flows would be more appropriate); citing Australia as an example of an economy without industry (the country had, in 2022, four times more manufacturing value added per capita than Brazil, according to UN-SDG data); and using primary macroeconomic models in which banks wait for families to save to grant credit (literally, a gold-standard premise), among other sophisms.

As I showed in the 6/9 column, the developed countries have been using the entire arsenal of industrial policies (public banks, subsidies, government purchases, trade barriers) to gain positions in the technological race of the green economy. Obedient ladder-kickers, our textbook liberals defend a subordinated Brazil, selling raw materials to overlapping technological paradigms: iron ore, oil, lithium, rare earths, etc.

The coordinated attacks seek to “poison the well” of public opinion against the expansion of BNDES disbursements, a key point of the neo-industrialization project of the government of Luiz Inácio Lula da Silva. After all, who is interested in a development bank with private characteristics, which does not challenge the resource allocation criteria of the relentless banking oligopoly in Brazil and the insufficient domestic capital market?

On a panel at the event commemorating the 71st anniversary of the BNDES, José Roberto Afonso mentioned having heard from former president Fernando Henrique Cardoso (his birthday on 6/18) that “you cannot privatize a development bank; either the BNDES is public or it does not exist”.

Interestingly, the history of the bank shows that, among its original missions, there was the construction of a capital market… private. Until today, the BNDES endorsement of a debenture operation or a PPP (public-private partnership) is a seal of quality in the market.

The bank is an asset of our development! Not only does it structure new markets, full of externalities and uncertainties, but it also invests in publicly traded private companies, via BNDES Participações. Nothing is more rational than a bank using dividends to expand productive investments and to remunerate its owner, the Brazilian State. If the US government had done that to Elon Musk’s Tesla, after investing nearly $5 billion in the entrepreneur’s initial ventures, it could have socialized part of the company’s monumental valuation. The BNDES has been doing this since 1982.

By comparison, one of the safest banks in the world, Germany’s KfW, is a national development bank, issuing bonds globally with a direct guarantee from the German Treasury, and reportedly having a “state directive function” (just like the BNDES). KfW has subsidiaries specializing in venture capital (KfW Capital), in companies in developing countries (it is already in 70 countries, including Latin America) and in the financing of exports and projects (KfW-IPEX). Since 2015, KfW IPEX-bank has focused on expanding the rail network and on green hydrogen (which the BNDES has plans to advance). According to data released in 2022, IPEX-bank accounts for around 30% of KfW’s funding. At BNDES, these disbursements are equivalent to 3% of the total.

Only reindustrialization can help Brazil to overcome the condition, pointed out by Oswald de Andrade, of “dessert country”, the one that appears at the end of imperialist menus. An audacious BNDES is the centerpiece of this mission.

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