Ferraz defends BNDES role
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Ferraz defends BNDES role

It has become normal in Brazil for private-sector banks to express frustration with the scale and cost of BNDES’ presence in financing corporate Brazil. However, given the power of the bank to engage with private-sector financial institutions (either through granting debt lines that are passed through the private banks, or from holding equity stakes in companies that the banks see as clients or potential clients), these criticisms are made off-the-record.

João Carlos Ferraz, director of planning at BNDES
João Carlos Ferraz: BNDES is a means, not an end. It has a programme for investment, but the source of financing is open

This made recent comments by André Esteves, CEO of BTG Pactual, interesting. “I don’t see any sense in BNDES financing big companies in Brazil that could easily be financed by the capital markets,” he told the Financial Times in August. “There needs to be a tapering of BNDES.” Esteves’s comments relate to the debate that centres on whether or not BNDES’s participation acts to prevent crowding in of the private sector into long-term financing. In 2013 the development bank’s disbursements totalled R$190.4 billion, up from R$64.9 billion in 2007.

João Carlos Ferraz, director of planning at BNDES, argues that by providing a low, long-term interest rate called TJLP, currently set at 5.5%, the bank provides financing for projects that would not be viable from the market.

Is BNDES’s use of TJLP crowding out the private sector, as Esteves implies?

No – it’s the other way around. It is the Selic [the central bank’s overnight rate] that prevents long-term financing for sustainable projects. TJLP is an instrument to mitigate that the basic rate is structurally very high.

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