BNDES: Disbursements for high-end sectors fall to 24% – 04/21/2023 – Market

From the factory of national champions to being appointed for hiding a black box of corruption that never existed; target of right-wing politicians for financing infrastructure projects in countries governed by the left to a new orientation, with the return of President Luiz Inácio Lula da Silva (PT) to power.

In 16 years, the BNDES (National Bank for Economic and Social Development) underwent a change in profile — it gradually moved away from financing more complex industrial and infrastructure projects and made contributions to simpler projects, through the distribution of energy and agriculture.

From 2004 to 2020, there was a drop in disbursements in highly complex activities, from 32% to 24%. In addition, there was also an increase in the percentage of disbursements in low-complexity activities, from 30% to 40%.

The data are from an exclusive study carried out by researchers from Cedeplar/UFMG (Regional Development and Planning Center, Federal University of Minas Gerais).

Some examples help to show this change in profile: the pipeline transport segment received R$ 22.4 billion in the cycle from 2004 to 2008, and the manufacturing of petroleum refining products received R$ 23.8 billion in the period 2008 to 2008. 2011 —both considered highly complex. Low-complexity segments, such as electricity distribution, received R$ 7 billion in the most recent cycle.

The researchers separate the financing that occurred under different industrial policies, starting with the first Lula government. The PITCE (Industrial, Technological and Foreign Trade Policy), for example, was launched in 2004, followed by the PDP (Productive Development Policy), which began in 2008.

The PBM (Plano Brasil Maior), which emphasized stimulating innovation and national production, occupied the period from 2011 to 2014. The post-PBM period, from 2015, coincides with the impeachment of President Dilma Rousseff (PT) , in 2016, and the governments of Michel Temer (MDB) and Jair Bolsonaro (PL).

The BNDES, like all development banks, plays an important role in policies for advancing production, this applies to both developing countries and rich countries, evaluates Cedeplar/UFMG professor João Prates Romero, one of the authors of the study.

These institutions gained more weight in the world, especially to deal with China’s entry into the production of higher technology goods, he explains.

“As far as we know, the corruption problems of the past are not related to the BNDES. The question is to define how to implement these policies and what is the purpose of the financing. It is necessary to maintain policies aimed at the development of the Brazilian productive structure, with clear criteria” , says Romero.

From the point of view of disbursements, the researchers point out that there was a gradual change in disbursements, which became even more conservative in President Lula’s previous terms, when more lucrative activities took the place of more complex ones.

The most complex disbursements of the first Lula administration include funds for a petrochemical industry in Bahia and Sergipe, for example.

In recent years, the low-complexity sugarcane sector in São Paulo and Minas Gerais was among the main recipients of resources, according to the data.

“But simply reducing the bank’s role, as was done after the impeachment, destroys an important instrument instead of using it more adequately”, says the UFMG professor.

Complexity is measured through the level of diversification of regions and activities. The most complex activities, in general, are the cutting-edge ones, with greater technological intensity.

Based on data from Rais (Annual List of Social Information), from the Ministry of Labor, the study considers the index of comparative advantage that will indicate competitiveness or not in that activity. With this, the number of competitive regions in each activity can also be calculated.

The researchers also concluded that the percentage of disbursements for activities with greater complexity than the region in which they would be carried out —and that would help to raise the productive structure of those places— was also reduced. It goes from an average of 20%, from 2004 to 2008, to 11%, from 2015.

Upon taking office as the bank’s new president, PT member Aloizio Mercadante defended that the institution turn its eyes to industry and small-sized companies.

“It’s very good, as the dear minister Carlos Fávaro says [Agricultura], that Brazil is the farm of the world. It’s very good, but it can’t just be the farm. Industrial products with high added value are essential for the development of Brazil.”

The line that needs to be adopted is the guarantee of better financing conditions, especially those destined to infrastructure and investments to modernize the Brazilian industrial park, evaluates Rafael Cagnin, economist at Iedi (Institute of Studies for Industrial Development).

“The lack of financing is a problem that has been going on for a long time, the windows have become very narrow, with short periods of favorable financing conditions. The role of the BNDES in the new Lula government has to be to reverse this process, considering the shortages of infrastructure that are very large.”

In 2018, the TLP, which considers inflation by the IPCA (consumer price index) plus the real interest rate on Treasury bonds, replaced the TJLP (Long-Term Interest Rate), which was lower.

Cagnin adds that the most complex fields are in highly competitive sectors where innovation is an axis. If it had taken a more active stance towards reversing or at least halting this process, the BNDES would have been preserving the financing of these more complex branches.

“As a development bank, it needs to boost the activities that add more value and which are normally the most complex and technology-intensive ones”, he says.

Mercadante’s speeches have reinforced the signs that a new policy for the BNDES, in contrast to the previous government. The new board also shows signs of greater attention to green economy and sustainability-oriented projects.

Despite this, on condition of anonymity, a former director of the bank says that the so-called “pen without ink syndrome”, in which BNDES technicians do not feel safe to endorse projects of greater complexity and that require more resources, continues. taking place even under the new Lula government.

He adds that it is not the BNDES that chooses the companies that will receive financing, but the institution expresses its priorities through the financing conditions offered.

If it is the demand that hits the hammer in the approval of financing, it is natural that from the crisis of 2015 and 2016, companies have demanded resources for less complex projects, he says.