Slimmed-down state-owned banks could impact rebound of activity
After a slowdown in investment in 2019 and the perception that few companies are resorting to banks when looking for borrowing, there is a growing debate about how slimmed-down state-owned banks - especially the Brazilian Development Bank (BNDES) - impact the rebound of activity. The capital market has given signs that it is able to fill at least part of this gap.
Some analysts say the slower-than-expected pace of demand for financing and of investments could have more to do with uncertainties both in the country and abroad and the lack of well-designed projects. But others question the "timing" of downsizing state-owned banks without having greater competition in the banking system at a time when the country is struggling to draw investments to drive the economic rebound.Fundraising by non-financial companies through BNDES disbursements and primary issuance of debt and shares totaled R$341.2 billion in the 12 months to October 2019, a survey by the Center for Capital Market Studies (Cemec-Fipe) shows. This is 5.6% higher than the R$323.1 billion peak seen in 2014, says Cemec's coordinator Carlos Rocca.
The composition of this funding, however, is quite different. In 2014, BNDES's disbursements amounted to R$187.8 billion, and market issues to R$135.3 billion. By October of last year, BNDES's disbursements had fallen to R$62.1 billion, while debt and equity issues totaled R$279.1 billion.
Mr. Rocca points out that growing corporate financing between 2014 and 2019 contrasts with a nominal fall of 3.7% in gross fixed capital formation (GFCF), a measure of investment in machines, construction and innovation. "In terms of volume, there is no indication that the total long-term funds in 2019 curbed investments," he says.
In the 12 months to September 2019, consultations sent to the BNDES fell 44.5% in real terms to R$60.4 billion, according to the bank's latest bulletin, compared to R$108.7 billion by September 2018. Approvals grew only 0.7% to R$78.7 billion but disbursements fell 4.4% to R$64.7 billion.
"It is not that there is no money available, the bank is operating normally, but demand for its instruments is not here," says Carlos Kawall, former secretary of the National Treasury and director at BNDES, now ASA Bank's director.
Mr. Kawall sees indicators suggesting "a very strong dynamism" of the capital market, which "has been filling, to a large extent, BNDES's space." In his view, the lackluster growth of the Brazilian economy does not...
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