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UN Group Meeting - “Rethinking the Role of National Development Banks” Demian Fiocca

BNDES: Financing the Brazilian development. UN Group Meeting - “Rethinking the Role of National Development Banks” Demian Fiocca Vice President – BNDES December, 2 2005.

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UN Group Meeting - “Rethinking the Role of National Development Banks” Demian Fiocca

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  1. BNDES: Financing the Brazilian development UN Group Meeting - “Rethinking the Role of National Development Banks” Demian Fiocca Vice President – BNDES December, 2 2005

  2. In the last years, economic growth was frequently interrupted by financial and Balance of Payments stress that affected aggregate demand. Macroeconomic Performance GDP Growth rates % year crisis Source: IBGE

  3. A new development cycle Macroeconomic Performance From 1995 to 2001 the current account deficits didn´t foster investments. Now, invesments grow along with domestic savings. Source:IPEADATA

  4. Macroeconomic Performance Public investment has fallen... Investiment as % of GDP Source: Brazilian Planning Ministry

  5. Investments are necessary … as a consequence, infrastructure investments dropped over the last 20 years Yearly infrastructure growth in the selected sectors (%) 23.9 Railways 16.0 Power Generation 9.8 9.8 Paved Roads 4.9 4.1 3.8 1.5 1.0 -0.5 -0.3 -1.6 1951/1963 1964/1980 1981/1993 1994/2002

  6. Credit/GDP ratio is growing but it is still low in comparison to other economies Growth and Long Term Finance … credit can help infrastructure…

  7. BNDES Highlights • Founded on June 20, 1952 • 100% owned by the Federal Government • Latin America’s largest development bank • Key instrument for the Federal Government Policies • Brazil’s main provider of long-term financing • Brazilian Export Bank • Equity investor through BNDESPAR

  8. Infrastructure (Energy and Transport) Steel Heavy Industry - Consumer Goods - Small and Medium-Sized Enterprises Technologic Development Import Substitution Petrochemicals, Pulp & Paper, Steel Capital Goods Energy Agribusiness Competitive Integration Private Infrastructure and Exports Privatization : Management of Privatization Program Urban and Social Development Industry - Infrastructure - Exports Social Inclusion – Development of Capital Markets 1950 1960 1970 1980 1990 Today BNDES: A historical perspective

  9. BNDES and Multilateral Institutions • Adequate return • Good asset quality indicators Economic Indicators World Bank (30/06/04) BNDES (31/12/04) IDB (31/12/04) US$ million Net Assets 61,769 67,346 229,213 Net Worth 5,317 18,511 35,463 Net Income 511 1,176 (2,404) Disbursements 13,748 3,768 10,024 Capitalization 8,18%27.49% 15,47% ROA 0.95%1.72% -1,04% ROE 14.11% 6.60% -6.55% Non performing Loans 0,64% 0,43% 0.59%

  10. BNDES: Funding • FAT - Worker Assistance Fund Permanent financing or quasi-equity • Foreign Funding Government Agencies and Multilateral Institutions IDB, JBIC, World Bank, KfW. Market Funding Bonds, Loans, Structured Notes (ABS)

  11. Funding 2004 – Cash Flow Excellent source of funding without budgetary effects. FAT- Worker Assistance Fund Others 13% 3% Sale of Assets 9% Treasury Agent 5% Return on Investment 70% Source: BNDES Financial Area

  12. Annual Disbursements R$ Billion US$ Billion Converted to US dollar on the disbursement dates

  13. Credit Market in Brazil The BNDES responds for 19% of the total credit in the economy Other directed resources Leasing e Public Sector Free resources BNDES

  14. Credit Market in Brazil BNDES credit has a counter-cyclical effect Source: Brazilian Central Bank Free Credit grew more than BNDES Financing

  15. Credit Market in Brazil Source: Brazilian Central Bank BNDES participation increases during the downturn periods of credit/GNP ratio

  16. BNDES credit analysis takes into consideration factors beyond the financial return of the project, seeking the promotion of economic and social development. Spread reductions: 1,0 p.p. to less developed regions 0,5 p.p. to higher priority sectors 3,5 p.p. to MSMEs Special programs (railways, capital equipment) Variable upside required: Equity and Quasi-equity participation BNDES Selected Goals

  17. Disbursements according to operation type BNDES works in association with commercial banks % Source: BNDES Financial Area

  18. Disbursements Characteristics Private firms absorb 98% of the BNDES disbursements 18

  19. Disbursements of the BNDES by Sectors of Activity Focus on infrastructure and industry Remark: Excludes secondary market transactions Converted to dollar on the disbursements date Source: BNDES Financial Area 9

  20. Disbursements by Firm Size Large number of operations with MSMEs Number of Operations US$ Million Excludes secondary market transactions

  21. Disbursements by Firm Size Support to MSMEs and create jobs October Converted to dolar on the disbursements date

  22. Job Creation – BNDES Effects Firms supported by the BNDES presented a much higher growth of formal job creation than firms not supported.

  23. Job Creation – BNDES Effects Effect is stronger in the smaller firms

  24. The Brazilian Development Bank www.bndes.gov.br

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