The future role of Brazils development bank, the
BNDES, is in dispute, as the country considers exit strategies
in the economic recovery, and as the fiscal impact of fund
transfers from the Treasury to the institution are
Philip Suttle, chief economist at Institute of International
Finance, said yesterday: Ideally Brazil should wind down
BNDES as a counter-cyclical lender. He added that
sufficient tightening may not materialize.
Even though the fiscal impact is not reflected in the net
debt statistics, Brazils gross net debt ratio has
increased to over 70% of GDP, according to Fitch Ratings, the
credit rating agency.
Nicolas Eyzaguirre, director of the Western hemisphere
department at the IMF, said: We generally favour that the
exiting starts in fiscal policy including the kind of direct
lending that the BNDES does before monetary [exiting] but
sometimes that is difficult to achieve.
The BNDES, under president Luciano Coutinho, has been
central to the Brazilian governments counter cyclical
policies to face the global financial crisis and the credit
crunch. More than 200 billion reais ($110 billion) were
transferred to the Treasury in the past three years to boost
Lending to local and foreign companies operating in Brazil
amounted to a record 137 billion reais last year, nearly 20% of
overall credit in the economy.
Henrique Meirelles, the president of Brazils central
bank, has praised BNDESs role in boosting investment
during a period of credit restriction in the private
Partly thanks to the institution, the investment rate in the
Brazilian economy in 2009 increased to 17.7% of GDP, but this
is still low by international standards. Nevertheless,
Meirelles, says the end of the party is in sight.
This weekend Meirelles told Emerging Markets:
It is about time to exit all the crisis
The BNDES push was a very important stimulus to the
Brazilian economy. The additional funding was directed to
project finance. This has been very important for the recovery.
Investment is currently leading the growth. But obviously, that
stimulus is going to end by June. Private demand and credit
growth in Brazil at this point are on a sustainable path and I
do not think there is any problem with this.
Outside government, several economists have pointed out that
the BNDES intervention has an implicit fiscal cost and they
have stressed the need for more transparency.
Marcelo Carvalho, chief economist at Morgan Stanley, said:
Official fiscal targets are less meaningful because there
are so many technical adjustments.
Paradoxically, with the end of fiscal stimulus in sight,
there are concerns that the BNDES may soon run out of steam, as
its other sources of funding are drying up, such as an
employees fund, FAT.
A BNDES spokesman told Emerging Markets: This
is an internal issue. There has not been a firm decision on
that and it is not even public.