The new role of BNDES
NBCC and Swedcham host event on the initiatives that BNDES is launching to create closer ties with capital markets in Brazil.
The event took place in the Federação das Câmaras de Comércio do Exterior (FCCE) in Rio de Janeiro on February 10, 2017, and was organized by both NBCC and Swedcham. More than 40 people attended the event, in which BNDES director Eliane Lustosa delivered an interesting presentation on the new role of BNDES in the current challenging times for the Brazilian economy.
Ms. Lustosa is the director of Capital Markets at the Brazilian development bank. She has a doctoral degree in finance from Pontifícia Universidade Católica (PUC), and an impressive professional experience in the private sector. She also worked as a researcher at BNDES in her early career. Her presentation was followed by a Q&A session.
In her view, the difficulties the Brazilian economy is going through have created a unique moment.
“It is time to carry out reforms, and therefore it is a unique moment. Brazil is moving in this direction. We need adjustments that will affect us all, meaning we need to make difficult choices in order to achieve greater fiscal discipline. Indeed, making choices also means that we have to use available funds and resources with clearer focus”, she said.
BNDES is contributing to this process reducing its focus on the volume of the disbursements. As many of the readers know, the Brazilian development bank has nowadays larger annual disbursements than the World Bank.
“The great volume of disbursements through low interest rates credit lines in recent years had an impact on the participation of capital markets in long term financing. Now, we are trying to reduce this participation without causing disruptions. The policy adopted by the new BNDES administration, which took office eight months ago, aim to engage the vision of capital markets in our operation”, Ms. Lustosa explained.
Maria Silva Bastos Marques took office as the top executive of BNDES in May 2016.
According to the Ms Lustosa, a much more market oriented philosophy may be seen in following concession rounds, with risk return profiles of the projects to be defined by market standards, not imposed by the government. In the case of the recent transmission lines auction, for instance, this principle worked very well, she said.
Another main guideline for BNDES now is to pursue transparent and conscious application of its resources. Infrastructure continues to be a top priority, but environment, innovation and education can also be considered major concerns, across industrial sectors.
“Our current operational policy allows us to look at the attributes of the projects, instead of the sectorial criteria of the past. Our ambition is to reduce our participation sharing the financing support with the private sector. We are also revising our internal evaluation processes in order to speed up the analysis of projects. We know that a project can end up unfeasible if the analysis takes too long.
There is also an effort to provide clear information, including in English, in order to attract foreign investors.
Eliane Lustosa also addressed how BNDES is interested in stimulating private investors to share the financial support of projects with the bank.
“We are working on creating conditions to bring the market on board”, she said, citing ongoing initiatives such as a green fund focused on renewable energy that will receive up to R$ 500 milhões and a long-term facility focused on reducing the risk of infrastructure bonds, in partnership with the World Bank.
Closer ties with capital markets and private investors is the goal, and BNDES is also looking into creating a venture debt fund, currently a niche in the Brazilian market according to Ms. Lustosa.
“We are reviewing all processes, and of course we need a better balance between risk and results. Brazilian regulatory bodies are doing a good job, but there are still many challenges. That is why we are currently doing the best we can to improve the efficiency of the market. We want to assume a much more complimentary role that we have had”, Ms. Lustosa concluded.
Click here to see Eliane Lustosa´s presentation.
By Runa Hestmann, NBCC journalist
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