BNDES: ‘We need to stop demonizing industrial policy’ – 06/03/2023 – Market

The BNDES (National Bank for Economic and Social Development) needs to play a stronger role in promoting industry and innovation, but this will not mean repeating the policy of national champions that benefited large companies in the past, says the Director of Productive Development, Foreign Trade and Innovation, José Luis Gordon, in an interview with Sheet.

The institution has already launched a R$ 20 billion credit line to foster innovation, resources that will be added to another R$ 20 billion offered by Finep (Financier of Studies and Projects) with reduced interest rates. The package, according to him, has the potential to be the “greatest policy” to encourage innovation ever carried out in the country.

“We need to stop demonizing industrial and innovation policy”, says Gordon.

The bank president, Aloizio Mercadante, announced a R$ 20 billion package for innovation projects. Mr. can you detail?

The world today has placed the industrial and innovation agenda as a priority. The United States has done this. Brazil cannot stay out of this race. If we want to have a competitive industrial and business sector, nationally and internationally, we need a sector that is innovative. We need to stop demonizing industrial and innovation policy.

Now, it’s a risky activity. You imagine where you want to get to, but you don’t know how you’re going to get there, and you might not get there. Need to have financial instruments. It is very difficult to finance a risky activity for the industrial and business sector at 18%, 15% per year. No entrepreneur will pay that if it is a process that may not work out, both in development and later, putting it on the market and this product not being accepted.

This debate was held in Congress and approved. The BNDES will be able to support innovation activity from now on with TR [taxa referencial], which today is between 1.7% and 2% per year. That is, with a more attractive rate. At the same time, we made a lock that [o valor dos financiamentos] is a maximum of 1.5% of the FAT balance [Fundo de Amparo ao Trabalhador]. That means something like R$5 billion a year for the next four years.

Is the amount locked in the FAT to fund the subsidy or as a source of funding?

There is no subsidy here. Will continue to have TLP [Taxa de Longo Prazo, atrelada ao custo da União para emitir dívidas e que serve de referência para os empréstimos do BNDES], remunerating most of the balance, and 1.5% of FAT by TR. That means, in four years, R$ 20 billion dedicated to the innovation agenda.

The idea is to direct these R$ 20 billion to priority agendas. The CNDI [Conselho Nacional de Desenvolvimento Industrial] is setting up the priorities of industrial policy. They have already announced seven missions closely linked to the energy transition, digitization, and the health area.

Finep, the government’s innovation agency, has the same [papel de fomento]. The TR was approved at the beginning of the year for Finep, and it will be more or less the same amount, R$ 20 billion in four years. With the BNDES, there will be R$ 40 billion in credit for innovation. And we are working so that we can have actions together, including a single entry point for projects.

How big are those R$40 billion?

The BNDES reached around 6% of disbursements for innovation. Today, it is less than 1%. If you combine BNDES resources with Finep resources, it will certainly be the greatest innovation policy in recent years. It will probably be the biggest industrial innovation policy in the country’s history.

Mr. said that it is not a subsidy, but the FAT is being remunerated below the TLP or the Selic. Is this not an implicit subsidy funded by the fund?

To have an industry that employs, that pays better wages, more taxes, I need a highly competitive and productive industry. We are taking a very small part of the FAT, which is 1.5%, in order to stimulate exactly that. Oh, is it an implicit subsidy? It’s an implicit subsidy, I can’t say no. But it is a subsidy of a small part, which will generate a more competitive, more productive industry and will generate more jobs. And we will continue to remunerate the FAT at more or less the same level, the difference is after the decimal point, which will decrease. In the end, the balance up front will be positive.

The agro sector is super important for the country, it has strategic support, but it demands fertilizers, machinery and equipment, and who produces it? The industry. The role of industry as a driver of the economy is fundamental. That’s why I need an innovative and competitive industry, including for export.

In what way?

We launched a R$2 billion line in which we reduced our spread by 60%, with a strong focus on small export companies. Everyone says that we have to have an industry that is not just focused on Brazil. But if it doesn’t have the capacity to compete, and innovation is fundamental, we need to support it.

The BNDES supporting exports is very important. BNDES resources are not for countries. The BNDES does not support country A, B or C. The resources with which we support exports go to companies in Brazil, in reais, so that they can sell the products of Brazilian companies, generating jobs and income in Brazil, and it will also attract currency with the payment of exports.

For those who have receivables in dollars, we are launching a line that is: you can invest, make a natural hedge [pois tem receitas em dólar], and we will take the risk costs and we will have the bank’s spread. We reduce interest from 18% per year to between 5.5% and 7%. This is for him to invest in Brazil.

Mr. said the balance will be positive. Do you have any studies that show the potential for job creation, growth or gain in industry share?

We are working now with industrial policy exactly to [definir] where do we go. The industrial policy will set the targets, where we want to go and what we want to achieve. This will help build this greener, more digital, more innovative industry.

But do you have a goal?

We want to work internally at the BNDES to increase our support for the industrial sector and innovation, but this will be coupled with industrial policy. The resource will be aligned with the country’s priority agenda and with our great partner, which is Finep.

How to prevent strategic missions from becoming a new version of the national champions policy?

We work with the idea of ​​supporting the industrial sector within these missions. It is not a specific sectoral policy. We will support the best project, not company A, B or C. I will support the best projects within those missions, which is the most modern thing in the world today.

What will the single project door look like?

The idea is to have a single place where companies will forward this project, and the technical teams will analyze it. [Se] This project is a priority, so it will have a different cost. This project is not a priority, so its cost will be higher. On top of the TR, we will have the spreads, which will vary according to the country’s policy priorities.

Brazilian industry has a culture of demanding protectionism. How to stimulate exports?

President Lula has traveled the world to open the market for the Brazilian business sector. We are talking to all of them. And if they are innovative, they will be able to compete.

The government announced a policy of incentives for the purchase of brand new cars. Does this stimulus make sense in the midst of the discussion of sustainability?

The BNDES did not participate in the creation of this policy, but the idea is that it will be short-term. The automotive sector has a very large back and forth chain. The logic is: we are going to strengthen a policy that generates jobs, but for a certain period of time.

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X-ray

Jose Luis Gordon, 40

Director of Productive Development, Innovation and Foreign Trade at the BNDES since January 2023. Graduated in economics from USP, he holds a master’s and doctor’s degree from the Federal University of Rio de Janeiro. He worked in the ministries of Science and Technology and Education. He was director and president of the Brazilian Company for Research and Industrial Innovation.