Each R$1 borrowed by BNDES only generated up to R$0.25 in investments, says study

The policy of national champions practiced by the BNDES (National Bank for Economic and Social Development) during previous PT administrations poured resources into large Brazilian companies, but did not result in an increase in investments in the same proportion, says a report produced by the CMAP (Monitoring and Evaluation of Public Policies).

According to the study, for every BRL 1 invested in loans and grants, only BRL 0.12 to BRL 0.25 became additional investments. The value changes according to the methodology used, but the conclusion is the same: the result, although positive, is considered ineffective.

The CMAP is a body created in 2019 that brings together different government instances in the task of evaluating the criteria and results of public policies, with possible recommendations for improvement.

The analysis of BNDES loans contains 104 pages and was coordinated by the National Treasury, supervised by Secap (Secretary for the Evaluation of Public Policies, Planning, Energy and Lotteries) of the Ministry of Economy, with the participation of CGU (Controladoria-Geral da União) .

The study also relied on external consultancy from researchers Lívio Ribeiro and Vinicius Botelho, partners at BRCG. To arrive at the results, they started from a database with 1,872 companies, of which 653 carried out operations with the BNDES between 2011 and 2020 —representing between 12% and 33% of annual disbursements.

The technicians’ assessment is that the positive contribution of the bank’s performance on investments, albeit small, came from the expansion of the credit offer, which took place at a time when the financial crisis imposed greater difficulty for companies to access sources of financing . Subsidies played a minor role.

Based on this diagnosis, the board indicates the possibility of increasing the efficiency of the Banco de Fomento’s operations, with a reduction in subsidies, setting objectives and targets and adapting the size of loans to reach companies that really suffer from significant credit restrictions —mainly small and medium companies.

The conclusions go in the same direction as points already made in the past by economists who were critical of the use of the BNDES to boost subsidized financing for large companies without clear criteria.

Between 2008 and 2014, BRL 440.8 billion in loans were granted (or BRL 738.9 billion in current values ​​up to the beginning of 2022).

The operations left an account of R$ 89.6 billion in explicit subsidies —how much the government announced it would pay to reduce interest rates— between 2009 and 2021, also in updated figures.

In the same period, the government also had to pay a bill of BRL 213.29 billion in implicit subsidies, which reflect the difference between the rate charged on loans and how much the Treasury itself pays its investors to finance itself in the market. This subsidy exists because the Union took on more debt to expand the BNDES’ firepower.

When contacted, the development bank sent a 60-page report produced by the institution in response to the CMAP. In the document, the BNDES contests the results of the analysis and states that the sample of companies selected by the researchers is concentrated in large companies, influencing the findings in an undue way (the so-called “bias” in the result). According to the bank, the effects of the institution’s credit policy ended up “underestimated”.

“The study draws conclusions that cannot be generalized to the totality of BNDES support in the period”, he said.

The issue gains relevance at a time when the president-elect, Luiz Inácio Lula da Silva (PT), demonstrates his desire to once again strengthen the development bank, which will be chaired by former minister Aloizio Mercadante —also in favor of a greater role for the State in inducing of economic growth.

The campaign promise of Lula’s team is to focus the bank on granting credit to micro and small companies. But there is fear in the market that old practices will be resumed.

In an attempt to reduce resistance to his name, Mercadante announced to the bank’s boards a list full of names linked to the market and the business world. At the time, he stated that his administration will not be a return to the past.

“We are not going to bring the BNDES of the past, we are building the BNDES of the future. There is no fiscal space in the Budget to finance the BNDES, we have to seek new sources of financing”, said Mercadante this Wednesday (21).

Sought by his advisory, the future president of the institution informed that he will only be able to comment on the bank’s actions after being sworn into office.

The CMAP report indicates that the old policy of the development bank was practiced without criteria or definition of the target public to optimize the use of resources, which ended up being released according to demand and absorbed by the companies, mostly as a substitute source of other financing that they would already have access.

“Except in specific cases, the regulations did not provide for the granting of credit whose source of resources was the National Treasury, so that the decision on the allocation of resources was in charge of the BNDES, which used mostly programs, products and lines of financing already available”, says the document.

“The absence of a solid diagnosis hinders the consistent and adequate execution of public policy, since the results to be achieved have not been defined, nor the way in which public agents act.”

The effect expected by the government, of leveraging investments in GDP (Gross Domestic Product), was concentrated in the first two years. In the following periods, there was no additional impulse to investments, and the operations ended up contributing mainly to improving the companies’ cash position by replacing short-term debt with longer-term commitments.

“The evidence produced indicates that the subsidies did not have a significant impact on the investments made by the companies, but on their financing structure, with the extension of the maturity of liabilities”, states the report.

“This pattern suggests that the effects of the policy on investments and, possibly, on activity tend to have a limited duration, especially when the policy focuses on larger companies, as reflected in the evaluated sample. Thus, it is not recommended that policies of this nature extend for long periods, especially if the countercyclical performance [para atenuar efeitos negativos de uma desaceleração econômica, por exemplo] make up your goals.”

In its response, the BNDES stated that it acts as “executor of the public policies defined by the federal government” and that the extension or not of the measures is beyond the bank’s attributions. “The recommendations arising from this finding were forwarded to the Ministry of Economy, in line with the vision presented, so that it strengthens the mechanisms for evaluating public policies to condition their implementation or continuity”, he said.

One of the CMAP’s recommendations is precisely not to transfer public resources to the BNDES without describing the goals and objectives to be pursued, or without defining the target audience to be reached.

The report also pointed out the absence of a more assiduous control of contracts, mainly those operated by other financial agents. Monitoring was carried out by sampling, defined by lot and without taking into account the risk of the contracts, or by specific demand.

Furthermore, the BNDES did not require the submission of performance reports from beneficiaries. To give you an idea, in one of the PAC (Growth Acceleration Program) operations, R$ 6.56 billion were released without requiring proof of execution of the works. Monitoring was carried out “by mere proof of transfer of resources to the specific current accounts of the final beneficiaries (States), on a quarterly basis”.