Four months after deeply reformulating its operational policies, the Brazilian Development Bank (BNDES) begins the process of internal reflection that will lead to the development of a medium and long-term strategy, with guidelines until 2030. By the end of the year, a cycle of discussions involving the Bank’s technical staff will discuss what should be the role and performance of BNDES in an economy with low inflation and interest rates. The first step last Friday (05/05) was the accomplishment of the international seminar “The role of development banks in the present and in the future: experiences, opportunities and challenges,” organized in partnership with the World Bank, which gathered executives from eight international institutions and employees from BNDES, for a whole day. The event also marked the beginning of a series of activities to celebrate the 65 years of BNDES, which will be completed in June.
Before starting the design of a new vision of the future, in the experiences of its peers, BNDES sought elements for the internal reflection of the institution in the midst of the economic and social transformations occurring in Brazil and in the world. Multilateral development institutions and national development banks have contributed markedly to the global growth since the second half of the 20th century. However, the debate about the role of these organizations in developed or developing economies has intensified since the turmoils suffered by the international financial system with the crisis triggered in 2008.
How to develop investments that reconcile economic growth, income distribution, technological development, social inclusion and environmental sustainability without generating distortions in the economy? How to establish a complementary relationship between the performance of public institutions and the private capital market to enable more projects of interest to the society? These and other challenges have been addressed in the seminar in a series of panels and discussions that had the participation of the senior management of BNDES and about 350 employees in sessions open to all the functional staff. In addition to representatives of the World Bank, the event was attended by executives of Latin American Financial Institutions (Alide) and of the DBSA financing institutions (South Africa), KfW (Germany), Corfo (Chile), CDB (China), FDN (Colombia), Nafin (Mexico).
More with less – The most efficient allocation of increasingly scarce funds in face of the citizens’ growing expectations for better services, quality jobs and infrastructure proved to be the main challenge in common. Executives explained how their institutions are changing the role of mere financier for the one of catalyst of investments, acting as coordinators of the participation of the capital market and as institutional investors in the financing of projects.
The President of FDN, Clemente del Valle, presented the example of the Colombian development agency established in 2011 to overcome the historic deficit in infrastructure of his country. From a capital of US$ 2 billion, it was able to leverage a package with investment in infrastructure four times higher, mobilizing institutional investors and attracting the participation of foreign banks for the operations. In another example, Luiz Felipe Oliva, representative of Corfo, showed data from a program of guarantees for small business of the Chilean promotion institution which, considering its power of leverage, reached 5.0% of Chile’s GDP. In all the institutions that made presentations there is special support for micro, small and medium-sized enterprises (MSME), segment that generates more jobs and has more difficulties in accessing bank credit.
One of the exits for the expansion of access to credit is the use of tools and digital platforms, such as the digital platform presented by Mario de la Vega, Managing Director of the Mexican Nafin, which virtually turned the development Bank into a sort of fintech. The representative of KfW, Wolfgang Reuβ, said that technologies of integration systems with financial intermediating agents of credit from the German development bank practically made an old dream come true: the completion of a credit operation while the client, when being attended to in a bank, is drinking a cappuccino.
Infrastructure – The infrastructure was highlighted as an important vocation of development banks and a challenge in all countries, especially in the low-capacity scenario of public investment, due to the strong investment externalities. The challenges go beyond the financing, involving regulatory issues, difficulties in the structuring of projects, lack of guarantees and risk management issues, particularly in greenfield projects. Generation of energy, basic sanitation, transportation and urban mobility are investments that generate positive externalities in the economic, social and environmental dimensions, but escape the economical-financial logic of conventional banks for their long-term structuring and, consequently, high uncertainty. Seminar participants said that development banks, besides directly financing the infrastructure, may contribute to the structuring of projects and act as “flags” to attract private financing, especially from institutional investors such as pension funds and insurance companies.
Paul Currie, Chief of the DBSA risk area (South Africa), said that the bank of South Africa undertook a strong internal restructuring in the last years to leverage private investment and coordinate interactions among different spheres of government. To finance public investment, the bank focuses on supporting city halls to expand water supply networks, which have big social impact.
The need to support projects that generate externalities for the whole society has been reinforced in all presentations. Even in the case of a developed economy, such as Germany’s, there are market failures to be filled by the development institutions. The representative of KfW, as an example, gave the performance of the bank in the housing financing, with an emphasis on sustainability. He also cited the export credit as a strategic element for the German economy. KfW has been specializing in the support to the exports of aircraft and transatlantic cruises and also has acted as an arm of the German foreign policy by financing services with export credit insurance involving guarantees of the government of Germany.
Education – Another highlight of the seminar was the need to improve mechanisms for assessing the impact of the action of development banks as a way to improve their performance, not always easy due to the difficulty of establishing comparative analyses with counterfactual. The participants agreed that the institutions need to see education as an important component of investment for the development of countries, since human capital is essential to the advancement of productivity in the economy. College credit programs and school infrastructure were highlighted by representatives of KfW, Nafin, Corfo and of the China Development Bank (CDB).
The Chinese development bank also drew attention to the cooperation among development banks of various countries, citing its credit lines to other Southeast Asian institutions or associations with them in co-financing of projects, apart from the exchange of information. In Latin America and the Caribbean, the ALIDE stands out for its role of information exchange and training programs offered.
For the President of BNDES, Maria Silvia Bastos Marques, the seminar was an example of the value of exchange of experiences among development banks. “We had some amazing experiences reported here. I was happy to see that we are, somehow, addressing all these themes here at BNDES,” said Maria Silvia, who accompanied all the debates and closed the event alongside Ceyla Pazarbasioglu, Managing Director of the World Bank. “We are thankful to have all these institutions here to help us face the challenges of the future. BNDES plays a key role in the Brazilian economy and it needs to fit in this environment of rapid change not only in Brazil, but in the world. This discussion is very important so that the Bank can reset, rethink its role, its tools and its way of acting, always trying to give maximum contribution to the sustainable development of our country.”