BNDES export credit reaches highest level since 2016 – 12/30/2023 – Market

Disbursements from BNDES (National Bank for Economic and Social Development) to finance the export of goods produced in Brazil reached US$ 1.6 billion this year, the highest level in this modality since 2016.

The amount represents more than the total paid by the institution in 2021 and 2022 combined. Embraer is one of the main borrowers of the credit line, used to support the shipment of 67 aircraft abroad.

The resumption of disbursements is a strategy defended by the bank’s current management, under the command of Aloizio Mercadante (PT).

After BNDES credit shrank during the governments of Michel Temer (MDB) and Jair Bolsonaro (PL), the new management set the goal of doubling in size by 2026, the last year of Luiz Inácio Lula da Silva’s (PT) mandate.

Although there is no specific value targeted for 2024, the intention is to continue expanding transfers, especially in the export segment, says the director of Productive Development, Innovation and Foreign Trade at BNDES, José Luis Gordon.

“One of the pillars of the neo-industrialization agenda is an important industrial export sector, which gains market share, gains scale, generating more jobs here in Brazil”, says the director.

“We approached the business sector, we created a line of US$ 2 billion, reducing the bank’s spread for exports by up to 60%. This generated a demand of US$ 4 billion in pre-shipment projects [que financia a produção dos bens que serão exportados]”, he adds.

According to him, Embraer is the main demander for the credit line. The bank has already approved support of almost R$10 billion this year, in converted values. Approval is a step prior to the actual disbursement of the loan.

However, the reduction in the spread also paved the way for other companies in the food, machinery and equipment and automotive sectors to start requesting credit from BNDES to finance exports. “We managed to diversify this pool of supported companies well,” says Gordon.

The record numbers have been praised by the bank’s management as one of the symbols of the bank’s resumption of financing for industry.

When contacted, Embraer informed that “the financing of aircraft exports is a common practice in all aircraft manufacturing countries” and that the mechanism “is fundamental for Brazilian exports of high technology and high added value, maintaining the generation of hundreds of thousands of jobs throughout the Brazilian aeronautical chain”.

“Embraer has plans to continue growing over the next few years and, to this end, the role of BNDES is strategic so that we can continue producing aeronautical technology in the country and exporting planes from Brazil to the world”, says the company, in a note. The company also highlights that the financing conditions applied by the country are defined by international parameters.

Financing the shipment of goods to the foreign market is one of the categories of export credit already operated by the bank. Another, more controversial, is the financing of works and other services provided by Brazilian companies abroad — which includes engineering works.

This type of credit has been suspended since 2016, when large construction companies in the country benefiting from the line began to be investigated in Operation Lava Jato.

In the past, the modality was used to finance controversial works, such as the Caracas metro, in Venezuela, and the Port of Mariel, in Cuba — whose debt the country now says it cannot pay.

Recently, the Lula government sent a bill to the National Congress to authorize the resumption of financing operations for the export of services. The proposal, previously discussed with the TCU (Federal Audit Court), still needs approval from parliamentarians.

Gordon assesses that, once the priority economic agenda is approved in Congress, the development bank will have more space to dialogue with deputies and senators about the proposal throughout 2024.

According to him, some parliamentarians have already given favorable signals to the initiative. Another current, however, defends the need for these operations to receive prior approval from Congress.

Deputy Mendonça Filho (União Brasil-PE), Temer’s former Minister of Education, is the author of a PEC (proposed amendment to the Constitution) to give Congress the exclusive competence to “authorize the carrying out of credit operations by financial institutions controlled by the Union, whenever the object of the operation is to be carried out outside the country”.

Wanted by Sheet, he says that the resumption of exports of goods by BNDES “is a necessary policy”. “A country that has a strong international presence needs to have financing,” he says.

He says that his proposal is much more focused on operations whose final risk is assumed by a foreign country — as was the case in engineering works financed abroad.

“It was this logic that led us to invest millions of dollars of Brazilian taxpayer resources to finance Mariel, to this day without any return to Brazil, the Caracas metro, in Venezuela, with huge losses”, he criticizes.

The idea, according to him, is to condition an external financing policy to prior approval from the Legislature.

“There is no provision that requires authorization on an operation-by-operation basis,” he states. “A credit policy for aircraft exports is indisputable, it can have a more robust credit policy. Now, it will finance a project in a country, a hydroelectric plant, a bus, Congress has to decide.”

The deputy argues that the proposal does not intend to create obstacles to Brazil’s international insertion, but to allow Congress to define the general lines of action for public banks in terms of export credit.

“The PEC is more principled, it does not directly conflict with the project [do governo]. The intention is for Congress to participate in politics. It won’t be an operation-by-operation endorsement,” he says.