Nelson Barbosa: BNDES expansion will not bring problems – 04/06/2023 – Market

The objective of gradually expanding the BNDES to reach a level of disbursements of 2% of GDP in 2026 against 1% in 2022 is not an obstacle to monetary policy, with the management of the development bank concerned with being a partner of the private credit market and not a rival for funding, said the institution’s planning director, Nelson Barbosa, this Thursday (6).

The former Minister of Finance in Dilma Rousseff’s government said during an online event organized by Bradesco BBI that the bank is working on its planning for the next four years and that among the main goals is a dividend payment of around 25%.

“It is not a return of that BNDES that had a very high subsidy from the Treasury, especially between 2018 and 2014”, said Barbosa. “The magnitude (of the bank’s expansion) alone would reassure anyone who is concerned with the efficiency of monetary policy,” he added.

“The BNDES growing up to 2% of GDP by 2026 does not seem to me to be a significant boost in demand in a macroeconomic context. I believe that only the Americanas event had a greater impact than that in two months, in terms of credit contraction”, said Barbosa . He referred to the retail chain’s bankruptcy process in January.

The Central Bank has reinforced in its communication that expansionist “parafiscal” policies can reduce the power of monetary policy. On Wednesday, BC president Roberto Campos Neto touched on the subject by highlighting that the high volume of subsidized credit is one of the reasons why the country has the highest real interest rate in the world.

“I don’t think it will actually create obstacles of a relevant magnitude for monetary policy,” said Barbosa. He added that the BNDES will explain the issue to the Central Bank, “if and when the Ministry of Finance agrees. It would be inappropriate for the BNDES to seek the Central Bank to explain a measure that the Ministry of Finance is still analyzing”.

DISINVESTMENTS

Asked about the BNDES investment portfolio, Barbosa stated that the bank “has no guidance” to continue with the accelerated sales policy of the last four years.

At the end of 2022, the BNDES portfolio was BRL 62.7 billion, BRL 58.7 billion in shares and the remainder in investment funds. The stock portfolio, after the strong pace of sales of the bank’s shares, was concentrated in four companies: Petrobras, Eletrobras, JBS and Copel.

“With this concentration and given the current state of the stock market, uncertainty not only about interest rates trends in Brazil, but also in the United States and Europe, an aggressive short-term divestment policy is not part of the current strategy,” said Barbosa .

“Today there is no guidance for rapid disinvestment of the portfolio as there has been in the last four years, there is also no clear guidance for investment, for accumulation,” he added.

FUNDING

During the conference, Barbosa stated that the BNDES needs to “walk with its own legs” and reduce dependence on FAT resources for its financing operations.

One of the BNDES’ proposals, subject to congressional approval, is the creation of the LCD (Development Credit Letter) funding instrument, exempt from income tax and along the lines of the current LCI and LCA, said Barbosa.

“With this, the BNDES can raise itself, not depending on FAT transfers only. If the Treasury agrees and Congress approves it, we can start at the end of the year”, said the director. “It would be a source for the BNDES to gradually do what the banks out there already do, that is, its main source of funds is its own funding.”

According to Barbosa, the mechanism would bring advantages to the end of the subsidy discussion in the bank’s fundraising. “There is no need to talk about an implicit subsidy in this case, it is a financial intermediation where the BNDES’ activity would benefit only because the funding does not incur income tax.”

In addition, Barbosa mentioned that the BNDES intends to resume international fundraising after the channel had, in 2022, the lowest value in the history of the development bank. “There are several sources that may allow taking the bank’s disbursements to the historical average (2% of GDP) in a sustainable way.”

CAP 3

The BNDES planning director also stated that the government and the bank have been working on a new investment program in parallel with the project manager activities for infrastructure asset concessions that gained emphasis during the bank’s previous management.

The name of the new program has not yet been decided, said Barbosa, referring to it as “PAC 3”, an allusion to the acronym used in previous PT governments for the Growth Acceleration Program.

“It is a new investment program that will have several areas and within the areas the BNDES can contribute a lot. The objective is to help the government to structure a national plan of PPPs (Public-Private Partnership)”, said Barbosa.

He stated that the idea is to take the BNDES’ experience in structuring PPPs for municipalities and states in areas such as lighting and sanitation, “to a national scale”, and mentioned among the areas of interest health and education.