BNDES: States and municipalities have BRL 30 billion for investment – 05/31/2023 – Market

Expand the investment capacity of states and municipalities within the socio-environmental development agenda. This is the proposal of the new line of credit for entities of the federation, launched by BNDES (National Bank for Economic and Social Development). R$ 30 billion are set aside for this purpose, explains Tereza Campello, who heads the bank’s Socio-Environmental Board.

This type of financing for states and municipalities had been suspended since 2018.

The new scope includes urban mobility, sanitation, water resources, public safety, health, education and connectivity projects. The list also includes proposals for the recovery of historical heritage and areas affected by extreme weather events, such as floods and landslides.

Purchase of electric buses, works to protect slopes and installation of solar panels for distributed energy generation are some practical examples of projects that fall under this category.

“Our area works to generate employment and economic growth, aligned with socio-environmental policies that contribute to the reduction of inequalities, recovery and expansion of physical infrastructure in the country, promotion of the green agenda, in addition to combating the effects of climate change”, says Campello.

She says that the BNDES worked to get more competitive rates and terms. The bank also offers assistance to public sector clients to organize their project and enable them to access the resource. On the other hand, the interested party needs to have fiscal space to go into debt.

Analysis of the development bank, based on data from the National Treasury Secretariat and the National Monetary Council, points out that states have a fiscal limit, for the remainder of 2023, of around R$ 40 billion in total, and municipalities, of R$ 8.2 billion.

According to Campello, the resumption of investment is a priority for the government of Luiz Inácio Lula da Silva (PT), and the bank is aligned with this guideline.

“Public investment has plummeted in recent years, but Brazil will not return to growth if it does not invest again, and we understand that all investment is important — that of the federal government, that of the private sector, and also of states and municipalities”, he says. she.

“The BNDES lost relevance as a development agency in the last six years, it practically disappeared in this area, and now we are resuming this role with states and municipalities.”

She reinforces that the bank’s proposal is that this credit directed to investments can align states and municipalities with the federal government’s national program, which has not yet been launched.

“The federal program does not yet have a defined name, it could be PAC 3, a new investment program, but we are here advancing the service so that states and municipalities can prepare, organize projects, start talking with the bank”, says Campello . “The counter is open for anyone who wants to look for us, we are ready to serve you.”

The coordinator of the Public Management area of ​​the bank, Paula Barbosa, explains that given the size of the projects listed, the credit line is more appropriate for larger municipalities, and that the institution has other alternatives for smaller municipalities.

Economist José Roberto Afonso described the BNDES initiative as “excellent”. Today, he points out, this type of resource is offered in Brazil by foreign agencies, especially the BID (Inter-American Development Bank).

“The BNDES is a traditional financer of investments in management modernization and infrastructure, which tends to go through states. Defaults have always been very low”, he says.

The economist recalls that federal public investment has plunged in recent years. In 2021, for example, it was only 0.26 points of GDP (Gross Domestic Product), one of the lowest rates in the historical series that started in 1947.

According to Afonso, around 73% of investments made by governments, from 2011 to 2021, were made by these entities, 36% by states, and 36% by municipalities. Individually, on average, each of them invested more than the Union.

In 2021, investments by different levels of government fell to one of the lowest levels in history, 1.3% of GDP (Gross Domestic Product). It rose to 2% in 2022, but driven by states (0.9%) and municipalities (0.8%), with the Union maintaining the same participation (0.3%) since 2019.

“States and municipalities faithfully obey the LRF [Lei de Responsabilidade Fiscal]unlike the federal government,” he says

“The states today owe about half of what they owed when the law was enacted, and city halls may close this year with more money in cash than in debt. In theory, they tend to invest more and more.”

The BNDES resumes lending to investments by states and municipalities at a time of general funding retraction and interest rate increases, within the cycle of monetary tightening promoted by the BC (Central Bank) to combat inflation.

Data up to April show a drop of 17.5% in credit concessions in the month, with reductions in several modalities. The bank’s initiative, however, would not be in conflict with monetary policy, in the assessment of Nicola Tingas, chief economist at Acrefi (National Association of Credit, Financing and Investment Institutions).

According to him, development agents like the BNDES play an important role in the long-term development policy and in the transition of the economic cycle, such as the one Brazil is experiencing at the moment.

“Therefore, the action of reducing inflation and protecting the purchasing power of the currency by the Central Bank does not necessarily conflict with the public policy of support to the segment of companies and families”, says Tingas.

“Credit from the public sector to the public sector, in turn, is a matter of quality and sustainability in public finance management. and in positive correlation in relation to private agents.”

---

FINANCIAL CONDITIONS OF CREDIT TO INVESTMENT OF STATES AND MUNICIPALITIES

• Minimum amount of direct financing BRL 20 million
• BNDES participation Depending on the line, but normally up to 90% of the investment
• Financial cost TLP,, Long-Term Rate with monthly variation; in May it is IPCA + 5.93% per year
• Bank rate 0.9% to 1.3%
• risk rate 0.25% to 1.7% (depending on the rating) / 0.1% (guaranteed by the Federal Government)
• Deadlines 12 to 36 months of grace period / 12 to 24 years of amortization