BNDES: concessions and industry boost disbursements in 2023 – 12/29/2023 – Market

After years of retraction, BNDES (National Bank for Economic and Social Development) closes the first year of President Luiz Inácio Lula da Silva’s (PT) third term with more active participation in the Brazilian credit market.

The balance of the year has not yet been released, but the bank’s president, Aloizio Mercadante, has already announced that the volume of approvals for new financing grew 94% in the first eleven months and that disbursements for infrastructure will also close 2023 on a high.

For experts and industry representatives, the growth reflects both the evolution of infrastructure concessions carried out under the Jair Bolsonaro (PL) government and the launch of new credit lines for the industry.

The latest available data points to a 29% growth in BNDES disbursements between January and September, totaling R$75.4 billion. It is the highest value since the R$70 billion in the first nine months of 2017, in values ​​adjusted for inflation.

The volume of resources released for industry jumped 34% in 2023, to R$16.7 billion, the highest value since 2016. For infrastructure, the bank released R$28.2 billion, an increase of 7%.

On Saturday (24), Mercadante told the Panel SA column that the bank will break a record “in nominal values” of disbursements for infrastructure in 2023, with R$23.9 billion. The account, however, disregards energy projects, historically included among the bank’s infrastructure contributions.

Considering energy, the total amount disbursed to infrastructure is still well below the years of the bank’s greatest participation in the country’s investments, at the end of the Dilma Rousseff government, when large hydroelectric projects were still under construction.

The BNDES said that the infrastructure area “currently operates in the logistics, transport, sanitation and mobility subsectors” and that the energy sector is currently managed by the Energy Transition and Climate area, but the website’s historical data has not yet been changed .

“The bank is reaping part of the investment in projects that was made in the past”, says economist Claudio Fritschak, from the Inter B consultancy. “The best-known case is sanitation, but it is not the only one”, he adds, citing highways and airports like other sectors.

In fact, among the largest financing operations recorded in 2023 are investments in two blocks of airports granted by the Jair Bolsonaro (PL) government, in sanitation companies granted by states and in highways and railways.

Sectors granted to the private sector represented two thirds of BNDES disbursements for the infrastructure area in the first nine months of 2023. Energy represented less than 30%.

New financing approval data indicates that the profile should be maintained, at least in the short term. Until September 2023, energy accounted for just 6.6% of the approved value for infrastructure. Transport and public services accounted for just over half.

Mercadante told Sheet that the works of the New PAC are already impacting the race for bank financing. The list of large projects, however, indicates that the growth in demand comes from auctions held during the Bolsonaro government — although a large part of them were included in the Lula government program.

The growth in disbursements to the industry shows the “creativity” of the bank’s new management to offer lower rates, says the president of Abimaq (Brazilian Association of the Machinery and Equipment Industry), José Velloso.

He cites as an example the launch of a credit line linked to the dollar for companies with receivables in US currency, and another line for investments in innovation and sustainability with lower interest rates than the TLP (Long Term Rate).

“What we see is a better will and that the BNDES has launched more realistic lines in terms of cost and volatility”, he states, highlighting, however, that the cost of financing through TLP remains a cause for concern for the industry.

Opponent of previous administrations, the bank employees’ association also questions the lack of signs from the Lula administration regarding changes to the TLP or the public service concession model, which has also been criticized by unions and government allies.

The entity’s president, Arthur Koblitz, also complains that the government is slow to change the rules of the FAT (Worker Support Fund) to eliminate the use of the fund’s resources — currently one of the main sources of domestic financing for the BNDES — to cover the Social Security deficit.

“Issues such as the FAT and reviewing the TLP may even be relevant to achieving the goal of disbursing the equivalent of 2% of GDP”, says Koblitz, citing projections announced by Mercadante in the release of the third quarter balance sheet.

BNDES expects to close the year with disbursements equivalent to 1.1% of GDP, an increase of 1% compared to what the bank itself estimated in 2020.

Mercadante has been counting on Lula’s support to unlock resources. The Ministry of Finance had already agreed to reduce the payment of dividends on the bank’s profit to the legal minimum of 25%, ensuring that part of the gain returns in the form of financing.

At an event in Rio de Janeiro at the beginning of the month, Lula said that the country needs money to invest. “If BNDES doesn’t have money, we’ll have to go talk to the [ministro da Fazenda, Fernando] Haddad”, he stated. “We have a mission to make this country grow again and, to grow, the BNDES is an important player.”

The BNDES also obtained a victory at the TCU (Federal Audit Court), which authorized the bank to review the schedule for returning irregular transfers made by the National Treasury in previous PT administrations.

With the approval of the Ministry of Finance, the institution proposed the payment of the remaining R$22.6 billion in eight installments of R$2.9 billion annually, to be paid between 2023 and 2030.

Frischtak says he does not see the BNDES today with dramatic changes that signal a return to the Dilma Rousseff period, when it consumed high Treasury resources in credit subsidies. But an open question, he says, is the search for new sources of financing.

“The risk is if, in this process, BNDES would be competing on an unequal basis with the private sector”, he states, which could lead to a process known as “crowding out”, when the expansion of public spending generates an increase in interest rates and slows down private investment.