Lula wants BNDES as an investment bank, and experts criticize proposal

Former President Luiz Inácio Lula da Silva (PT) said in an interview with WW Especial: Presidencials this Monday (12), that the National Bank for Economic and Social Development (BNDES) will return to being an investment bank. “So the economy doesn’t have magic, man, we’re going to have to put credit for these people, we’re going to have to make a lot of credit, the BNDES is going to go back to being an investment bank,” he said.

The speech of the PT candidate for the Presidency of the Republic of reestablishing the role of the bank as the great financier of investments is criticized by economists heard by the CNN Brasil Business .

Vinicius Carrasco, professor at PUC-Rio and former director of BNDES, says that the focus on the bank’s operations, the elimination of financing with subsidized interest rates and the return of resources to the National Treasury were important measures taken to, according to him, “correct the course” of the institution. “What we saw was a course correction, more focused policies and the return of resources to the Treasury. So anything that strays from those three dimensions is going back to the past,” he said.

For Luiz Fernando Figueiredo, former director of monetary policy at the Central Bank, during the Lula government, the bank lent money to large companies at a low cost, which over time impeded the development of the capital market.

“There is no evidence that the policy they made had an impact. [positivo], on the contrary, it was a very negative impact. So much so that, when they stopped giving the subsidized money and there was a change in the loan correction index, the BC can significantly reduce the interest rate. It’s going back to the past in policies that didn’t work”, said Figueiredo.

The ability to offer credit is also a factor pointed out by economists as something that corroborates the infeasibility of the proposal said by the former president. Public finance specialist Murilo Viana says that, if the measure were to be put into practice, it would be necessary to detail the value of the fees and the “size” of the BNDES that Lula imagines. However, Viana points out: “if it is going to be the BNDES at the time of 2010, 2011 and 2012, with rates subsidized by the government, this is not viable”.

Sergio Vale, CNN expert in Economics and chief economist at MB Associados, recalls that the strategy of placing the institution as a focus for investment also harms the capital market. “The restructuring of the financial system was to remove the role of BNDES as a major investment funder and bring it to the capital market. It helped to develop the capital market in Brazil in recent years, especially during that period of lower interest rates.”

For the economist, bringing the bank back into this discussion contributes to keeping the risk of investments in Brazil high, in addition to putting pressure on interest rates and, consequently, hampering the work of the Central Bank (BC). “It gives the impression of going back to the past, that it will not do the necessary fiscal work, it will continue to keep the risk high. That keeps interest rates down and you keep the vicious circle that we had that was extremely detrimental to growth,” he said.

According to a survey prepared by Cemec-Fipe, the private sector was responsible for the growth in the relationship between investments and Brazil’s Gross Domestic Product (GDP) in the first quarter of 2022.

In the first three months of this year, investments corresponded to 17.91% of GDP in the period. The value is higher than the 17.55% recorded in the same period last year. In 2021, the value reached 18.92%.

Specialists suggest that the BNDES should, together with the capital market, make resources available for small and medium-sized companies. In addition, maintain the role it has been playing in assisting and organizing investment projects.

“Through the use of capital market instruments, the bank managed to reach the cutting edge, structuring infrastructure projects, for example. Instead of granting credit, he organizes the project, helping with privatizations, helping with concessions”, said Vinicius Carrasco.

Vale recalls the need for proposals for “credible” fiscal policies for the economy, something that could help to contain inflation expectations and, consequently, reduce the current basic interest rate.