BNDES wants to finance itself with individuals – 03/04/2023 – Market

The new direction of the BNDES (National Bank for Economic and Social Development) is negotiating with the Ministry of Finance the most significant set of changes in more than five years in the way the institution raises capital and grants loans.

On one front, the bank plans to launch a new instrument to raise funds in the market and reduce its dependence on the National Treasury. The Development Letter of Credit (or LCD), as it has been called, will be able to receive investments even from individuals and will work with a format and remuneration similar to existing financial options today – such as LCI and LCA (real estate and agricultural credit letters, respectively). ).

Nelson Barbosa, BNDES Planning director and former finance minister, tells the Sheet that the objective is to gradually eliminate the need for public resources for the institution. “We are trying to build the BNDES of the 21st century”, he says.

On another front, the new management proposes to make the use of the so-called TLP (Long-Term Interest Rate) more flexible in different ways, created by law in 2017 (during the Temer government) to prevent the bank from lending to customers at rates lower than the cost of funding from the National Treasury.

The bank suggests recreating credit subsidized by public coffers, as in previous PT governments. But this time, the measure would be aimed at certain strategic segments (such as energy transition and innovation), under authorization from the CMN (National Monetary Council) and with value limits to avoid a “blank check”.

“Some activities need subsidy to be viable and their return is not economic, but externality. They generate gains, such as in technology, social inclusion and environmental change”, he says.

Despite considering that the creation of the TLP removed the broad subsidy seen until that time, Barbosa criticizes the wording of the measure. For him, the law tied the bank to the obligation to remunerate the FAT (Fundo de Amparo ao Trabalhador, BNDES’ main source of funds and powered by public resources) using only one fee.

Therefore, he proposes the use of multiple remuneration options for the FAT —for example, using the Selic or longer-term Treasury bonds.

“If someone proposed that [remunerar captações a uma taxa única] in a private institution, he would be fired. That’s what the Temer government did, and we’re correcting it,” he says.

How did you find the BNDES? It’s no secret that the bank was in a downsizing process, but it went way beyond reason. We estimate that last year’s total disbursement was close to 1%, half of what it was before. The president [do BNDES, Aloizio] Mercadante has already stated, and we have reinforced, that one of the objectives is to return to the historical pattern of disbursing at least 2% of GDP, or R$ 200 billion. It would double the size of the bank over this term. For that, you also need funding. [financiamento]. Where does this funding come from? We present to the Ministry of Finance, which is analyzing, [proposta para] for the BNDES to raise funding through a new instrument —the Development Credit Letter, or LCD.

It would follow the molds of the LCA and LCI, through which you can raise income tax-free — something that also happens for infrastructure debentures. As a result, the BNDES does not need an allowance from the Treasury. He captures and passes.

Will anyone be able to invest? Individuals? In fundraising, our proposal is that it be like LCA and LCI. will be on the platforms [dos bancos] and will compete with other products.

Where will the funds raised be directed? When you put “development lyrics”, it’s a very broad thing. So we are exactly in this debate with the Treasury on how to delimit. Some things are kind of obvious. Infrastructure, financial inclusion of micro and small companies, environment, innovation. This develops the market more, does not compete with the private sector and will expand total credit in the economy.

How much does the BNDES raise today? Internally, very little, and captures externally to finance foreign trade. But, as Brazil has returned to the table of adults in the international economy, many external sources of financing are appearing.

We are being sought by sovereign funds of governments and private investors wanting to partner with the BNDES, either to form a fund in which the BNDES puts a part, and they put another, or to ask which projects have the quality stamp of analysis by the BNDES for they can finance.

Which countries stand out? China. Some sovereign wealth funds from Asia. Traditional investors, almost all Europeans and Americans. They are especially attracted by the energy transition. A great boom is happening in Brazil. There is also demand in the area of ​​sanitation, reurbanization, smart cities. There is an avenue of transformation that Brazil is just beginning to tread, with digitization, 5G, automation.

And will the bank, in this new phase, focus on what types of projects? The focus is on micro and small companies, working capital and infrastructure projects. In parallel, there is a demand, which can be financed by foreign capital, as it has been in the past, which is to reinforce export financing.

Due to the effects of Operation Lava Jato and other things, it ended up contracting a lot. Today it is below the historical average also because, mistakenly, this prejudice was created against financing the export of goods — I am not even talking about services.

Export of goods generates employment in Brazil. All major economies in the world have an effective system to support these exports. America, Germany and Japan have it, and we should have it too.

Mr. He spoke of prejudice with the export of goods and services, but it cannot be called prejudice, because there were problems with some of these operations. Yes. Problems occurred. There’s no doubt. So much so that there was an investigation. Who had to be punished was. But you shouldn’t kill an instrument for a possible misuse of one or the other, right? Everyone goes out in the car every day, and there are people who do stupid things with the car. Are we going to stop everyone from riding in cars? No. So, we have to know how to use this instrument well.

Does this also include the export of engineering services? For now, we are focusing on goods. We know that the engineering service requires a whole discussion with the TCU. He has already made several recommendations, and the Mdic and we are in discussion with TCU to incorporate TCU recommendations into legislation, in order to reduce regulatory uncertainty and be able to finance what should be financed.

Mr. he did not mention new major works, which were formerly the most cited, such as the transposition of the São Francisco river, large railroads. Great works are a penalty to be beaten by the president, right? At this moment, all ministries are raising stopped works and projects, and these great works will be announced by the federal government, not by BNDES.

Regarding the TLP, is there any assessment of the need for changes? We present three considerations that are being evaluated by the Ministry of Finance. The first measure is to revise the TLP law for what is in the law down to the CMN regulation, and the CMN to define the form of interest calculation to reduce volatility.

Second thing. We are requesting that the BNDES be able to raise funds from the FAT through a vector of fees, not just a [a TLP, formada pelo IPCA mais a taxa da NTN-B, do Tesouro, com prazo de cinco anos]. Who will determine this [o limite para cada remuneração]? The CMN. He will give the schedule saying that, from the FAT resources, the BNDES can raise X billion at the Selic, Y billion at the rate of five years. To finance working capital, for example, it is better to borrow through Selic.

If someone proposed this [remunerar captações a uma taxa única] in a private institution, he would be fired. This is what the Temer government did, and we are correcting it.

But the TLP brought advantages… TLP lowered the implicit subsidy. Or it may even have been eliminated. Only she sinned in the technical form. It could have been done with a multi-fee structure. I didn’t need to put only five years. We are here to fix the future, what happened happened. The TLP will continue to exist, but there will also be others.

And the third consideration? The third [proposta] is to authorize the CMN to apply a reducer to the market rate for specific activities or items. For example, for financing innovation or energy transition, it can be raised at 75% of Selic or 80% of TLP. And this is a subsidy.

For example, to finance the reconstruction of municipalities on the coast of São Paulo in the amount of up to R$ 500 million, the FAT would be authorized to transfer 90% of the Treasury rate. [Mas] would have a limiter. For example, it can only be 5% of the annual FAT budget. Put a lock to say it’s not a blank check.

Why do you need a subsidy? Because some activities need subsidy to be viable and their return is not economic, but an externality. They generate gains, such as in technology, social inclusion and environmental change. For example, the Safra Plan has subsidy, as well as regional development.

At the end of the year, the Central Bank expressed that any changes in the TLP could take power away from monetary policy and raise the neutral interest rate. How to interpret this fear and what to say about it now? The fear only he can explain. What I can say is that nobody is discussing the volume of subsidy as it was in the past, with a difference between TJLP [Taxa de Juros de Longo Prazo, usada antigamente pelo BNDES] and the market rate of more than seven points. No one is debating this. What is being discussed is whether, in some cases, the Treasury or the BNDES can apply 80% or 90% of the Treasury rate. So if it happens [subsídio], is small and limited. I don’t think this diminishes the effectiveness of monetary policy.

X-RAY
Nelson Barbosa, 53

BNDES Project Planning and Structuring Director. Former Minister of Finance and Planning (during the Dilma government) and former columnist for Sheet. Economist graduated from UFRJ (Federal University of Rio de Janeiro) and PhD in economics from the New School for Social Research (USA). Professor at FGV (Fundação Getulio Vargas), associate professor at UnB (University of Brasília) and researcher at Ibre (Brazilian Institute of Economics) at FGV.