BNDES finances more agriculture than industry since 2018 – 03/26/2023 – Market

In 2022, the BNDES (National Bank for Economic and Social Development) disbursed more resources in financing for agriculture and livestock than for industry for the fifth consecutive year.

This movement began in 2018, during the Michel Temer (MDB) government, and continued throughout the term of Jair Bolsonaro (PL).

It is a situation that differs from the scenario of previous years, when the factories received a larger share of resources compared to the countryside.

Of the total BNDES disbursements in 2022 (R$ 97.5 billion), 22% were allocated to agriculture (R$ 21.5 billion) and 19.6% to industry (R$ 19.1 billion), according to data released by the public bank.

The infrastructure sector, which involves activities such as electricity and construction, continued with the largest share among the segments (43.3%). Trade and services accounted for the smallest share (15.1%).

The industrial share even grew in 2022 compared to the previous year, but it was still below the share destined for the countryside. Factories had received 16.2% of BNDES disbursements in 2021, and agriculture, 26%.

“The industry needs to modernize, but the data show a narrowing of the BNDES credit lines”, says economist Rafael Cagnin, from Iedi (Institute of Studies for Industrial Development).

He avoids talking about a dichotomy between industry and agriculture, since financing for the countryside generates indirect stimuli in part of the factories, including machinery and equipment.

Cagnin, however, says that there is a lack of long-term loans for the industrial sector, a problem partially associated with the reduction in the size of the bank in recent years.

“There was a change in the way the BNDES operated. Before, it was more focused on infrastructure and industry, but it became a greater financing mechanism for agriculture and livestock, which already has options such as the Safra Plan and Banco do Brasil”, he says.

According to the economist, the difficulties faced by the industrial sector after the 2015 and 2016 crisis also curbed the demand for financing.

In 1995, the initial year of the historical series available, the factories received 57.2% of total BNDES disbursements. At the time, agriculture had stayed with 10.3%.

For the chief economist of the consultancy MB Associados, Sergio Vale, the loss of industrial participation is mainly associated with the poor performance of the sector in recent years.

“We saw a strong growth of agriculture with high prices”, says Vale. “The industry has been stagnant since the 2015 and 2016 crisis”, he adds.

Guilherme Rios, technical adviser to the CNA (Confederation of Agriculture and Livestock of Brazil), says that agriculture has been pressured in the last three years by the increase in production costs.

According to him, the prices of some inputs rose by more than 200%, and agricultural machinery also became more expensive. “This whole scenario made the producer demand greater volumes of resources in their financing”, he points out.

Rios assesses that BNDES credit is still not enough for the demands of agriculture, which forecasts crop growth this year.

“Currently, the sector is mobilizing for an approximation with the capital market, seeking new sources of financing, in addition to those made available by the Safra Plan”, he adds.

New direction talks about reindustrialization

According to Sergio Vale, from MB, the industry tends to gain share in BNDES disbursements in the government of Luiz Inácio Lula da Silva (PT).

This projection is associated with recent manifestations of the institution’s new command, which speaks of a need to reindustrialize Brazil.

Upon taking office in February, the new president of the BNDES, PT Aloizio Mercadante, said that it is “very good” to have the country as the “farm of the world”, but that it is necessary to go beyond agricultural commodities, with a special focus on industry .

Mercadante touched on the subject again on March 14, in an interview after the presentation of the bank’s balance sheet for 2022.

“Are we going to watch industry dismantle? Or are we going to have a bank capable of reacting, financing and inducing industrialization, as we did with agriculture?”, he questioned.

“The BNDES distributes 19% of credit from the Crop Plan, machinery and equipment, modernization of agriculture. We want to continue doing this. But we cannot watch industry data like these and think that it is like that,” he added.

Mercadante has been advocating diversifying the bank’s interest rates, which today practice the TLP (Long-Term Rate).

The TLP came into force during the Temer government to prevent the BNDES from lending resources to clients at levels lower than the National Treasury’s funding cost.

In Mercadante’s view, this mechanism is “very volatile”. He has already defended credit subsidies for specific sectors, such as those focused on innovation.

The new management, however, has been ruling out a return of the BNDES to the pattern seen between the second Lula administration and the administration of Dilma Rousseff (PT).

At the time, the bank was boosted with subsidized credit to large companies, which generated criticism from economists.

For Sergio Vale, from MB, the BNDES should focus its efforts on sectors related to innovation and green energy, in addition to advancing in the creation of an eximbank – an export support organization. These areas are among the priorities already announced by the new management.

“The BNDES can add to this. It is necessary to avoid as much as possible a bank from all sectors of the industry, and from projects that are not economically viable”, analyzes Vale.

Entrepreneurs call for change

For industry representatives, the sector’s loss of participation in disbursements reflects the increase in the cost of raising funds, with the impact of the increase in the Selic rate on the TLP. The problem, according to them, mainly affects small and medium-sized companies, which have less access to the private credit market.

The chief executive of Abimaq (Brazilian Association of Machinery and Equipment), José Velloso, points out that the cost of the main BNDES program for this segment, Finame, is currently around 24% a year. “This does not remunerate the capital”, he says.

Finame was responsible in 2022 for financing only 3% of the machines sold in the country. “And the damage is done in small and medium-sized companies. Large companies can go to the capital market, issue debentures, issue shares. Large companies manage”, continues Velloso.

For the executive, the current rates have guaranteed high returns to the FAT (Fundo de Amparo ao Trabalhador), the bank’s source of resources, and closed the door to companies. “It doesn’t make any sense for the FAT to be the biggest rentier in Brazil. It is an investment instrument for improving productivity and job creation.”

Abimaq supports proposals to change the TLP and suggests that the BNDES seek ways to raise funding beyond the FAT, such as international financing aimed at the green economy.

“The industry has the world as a competitor”, says the superintendent director of Abit (Brazilian Textile and Apparel Industry Association), Fernando Valente Pimentel.

“The BNDES will have to reassess the rates so that we have financing that is more compatible with world rates.”

As an example, he cites the challenge of adding value to cotton exports. “Instead of exporting 2/3 of the cotton lint crop, let us transform that. Cotton lint costs between US$ 4 and US$ 8 per kilo. Textiles cost US$ 20”.

A Sheet sought out members of the BNDES command in the Bolsonaro government to comment on the matter, but did not receive a response.