BNDES: Lender of first resort for Brazil’s tycoons / by Mark Langevin


BNDES: Lender of first resort for Brazil’s tycoons

Written by Joe Leahy, Financial Times

Summarized by Clara Langevin

In aftermath of Brazil’s incredibly close election the last year, it is no surprise that much of the Brazilian population still hold reservations against the Worker’s party and all of its respective agencies. Not immune to scrutiny is the BNDES. In this article written by Joe Leahy, the BNDES’ habit of lending to Brazil’s richest companies is analyzed. According to Leahy, the BNDES represents the PT’s commitment to state intervention in the economy. However, that economic vision is currently being challenged by 5 years of stagnation. These statist policies have supposedly set Brazil on track to a growing public debt and budget deficit. The new Minister of Finance, Joaquim Levy, is seen as a possible candidate to reverse this cycle within the Dilma administration. On top of this, the BNDES has earned nicknames such as “Bolsa Empresario” or Businessman Stipend because of its propensity to lend money to some of Brazil’s wealthiest individuals and companies. Leahy showcases the company Lojas Americanas, headed by Jorge Paulo Lemann, whose estimated $22.4bn net worth make him Brazil’s richest man. Lemann, along with the Batista family, who run JBS-one of the largest meat producers in the world, are controlling shareholders of the BNDES. As Leahy pointed out “BNDES and BNDESPar hold about 17.3 per cent of the state-owned oil company Petrobras, while BNDESPar alone holds an estimated 8.4 per cent of Vale, the world’s biggest iron ore exporter, and 24.6 per cent of JBS, the world’s largest meatpacker. BNDES also funded the oil, mining and logistics empire of companies controlled by Eike Batista, who was Brazil’s richest man until his group imploded last year.”

Due to this relationship between the BNDES and its polemic shareholders, many believe that the bank services as a catalyst to transfer taxpayer money into the pockets of businesses. However, the Brazilian government is quick to defend the bank and claim that its lending strategy was instrumental to mitigate the effects of the global financial crisis. However even with this strategy, it calls into question the raison d’etre of the development bank, to help Brazil’s poorest citizens. How can the bank benefit Brazil’s development goals if it is constantly lending to the richest. Even small and medium businesses fell that receiving loans from the bank is too complicated and feel discouraged to do so.

Leahy also accuses the BNDES of “dress up the budget deficit by having it pay dividends to the government from treasury bonds that it keeps on its books.” Or more simply put, attempting to turn debt into revenue. On top of that, many Brazilians are upset that the BNDES has begun to invest in other countries, such as port in Cuba and an airport in Mozambique, which makes Brazilians feel that the bank is neglecting its commitment to domestic development.