BNDES e a Bolsa-Empresário

 

Like many major Brazilian companies, Lojas Americanas borrows money at a heavy discount from BNDES, the state-run national development bank. Last year the store and an affiliate received R$2.7bn in BNDES loans mostly at a taxpayer-subsidised rate that is about half what many of its customers pay on their credit cards.

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For Dilma Rousseff, who has just started her second term as president, the country’s sprawling development bank lies at the heart of many of the challenges she faces in righting a listing economy.

With annual disbursements bigger than the World Bank, BNDES embodies the belief of her leftist Workers’ party, or PT, in the virtues of state intervention in the economy. This faith has only grown during the PT’s 12 years in power, and was cemented by the vogue for Chinese-style state capitalism that grew out of the free market-led collapse of the 2008 global financial crisis. 

But now the belief in state-managed capitalism is being tested as Brazil’s economy enters its fifth year of stagnation. The cost of statist policies has become manifest in the rise of public debt and the budget deficit.
To avoid a credit rating downgrade, Ms Rousseff has appointed a new finance minister, Joaquim Levy. As well as bringing Brazil’s public finances under control, one of his main tasks is to rein in BNDES. The government has already outlined changes in the development bank’s policies as the focus intensifies on the role of private interests in the state.

The bank has grown so much that its subsidy costs the government more than Brazil’s much-lauded bolsa família monthly benefit for poor families — earning the bank the nickname Bolsa Empresário, or “tycoon grant”. Critics argue it is a source of economic distortion and cronyism that undermines Brazil’s hard-won democracy.

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Stepping in
 
Founded in 1952, BNDES originally fostered the country’s steel industry and created a shareholding arm, BNDESPar, to manage its equity investments. It aimed to address “market failure”, lending to industry when the private sector was unwilling or unable. Over the decades, particularly during Brazil’s period of runaway inflation in the 1970s and 1980s, long-term finance was not available from the market, so BNDES stepped into the breach.

During the PT governments of Luiz Inácio Lula da Silva and Ms Rousseff, the bank exploded in size. BNDES’s total assets have grown nearly fourfold since 2007 to R$814bn as of June 30 last year, while disbursements last year were estimated at R$190bn, more than the annual output of neighbouring Uruguay.
Critics say the central complaint about BNDES is it essentially amounts to a transfer from taxpayers to businesses. This is particularly pernicious in a country that is one of the most unequal in the world. “There have to be some public objectives, some social justification,” Arminio Fraga, a former central bank governor and opposition figure, said of BNDES lending in an interview during the elections in October.
About 60 per cent of BNDES lending goes to large conglomerates rather than small and medium-sized enterprises, including many large companies deemed so-called “national champions”, in which it often also holds significant minority stakes.

BNDES and BNDESPar hold about 17.3 per cent of the state-owned oil company Petrobras, while BNDESPar alone holds an estimated 8.4 per cent of Vale, the world’s biggest iron ore exporter, and 24.6 per cent of JBS, the world’s largest meatpacker. BNDES also funded the oil, mining and logistics empire of companies controlled by Eike Batista, who was Brazil’s richest man until his group imploded last year.

All of these are quoted companies with ready access to western capital markets, and do not need public money, critics say. Even Mr Batista raised billions on the stock market before going bust. “The large companies can raise money on their own — it will be more expensive but it will not impede their investments,” said Sergio Lazzarini, professor at São Paulo business school Insper and co-author of Reinventing State Capitalism, which analyses BNDES.

Fostering the market
 
The dominant presence of BNDES in long-term lending has crowded out the private sector when record low interest rates globally might have fostered the domestic capital market, critics argue. Even some clients admit as much. “To be competitive, you have to take those BNDES rates into consideration,” Marcelo Odebrecht, the head of the eponymous construction group, said in Valor Economico, a business daily.

BNDES funding is so irresistible to businesses because it lends based on the TJLP, its long-term benchmark interest rate. As part of Mr Levy’s drive to clean up Brazil’s accounts, the government recently raised the TJLP for the first time in 10 years. Even so, it remains at only 5.5 per cent, less than half Brazil’s “risk-free” short-term rate, or Selic, which is set by the central bank and stands at 11.75 per cent.

BNDES can provide this generous subsidy because it enjoys cheap funding from two main sources — the treasury and workers’ employment insurance funds. For the workers, this implies a huge opportunity cost as they could have earned far higher market rates on the money elsewhere. “It’s like a transfer of wealth from workers to the industrialists,” says Aldo Musacchio, professor of business at Harvard and co-author of Reinventing State Capitalism.

The Treasury, meanwhile, incurs a loss as it raises money for the bank by issuing bonds at the Selic rate.

The government is defensive about criticism of BNDES. Guido Mantega, Brazil’s previous finance minister, claimed the bank’s huge ramp-up in lending helped counter the effects of the financial crisis. Yet the bank sustained high lending levels after the crisis subsided in 2010. Last year’s outlays were as big as in 2013, which was itself a record.

The bank points to its competent staff — non-performing loans are negligible and it makes more profits per employee than private sector lender Itaú-Unibanco and other development banks in Germany or China. It is not the clichéd state bank that props up bad companies. Seth Colby, an academic at Johns Hopkins University, said in a recent paper: “The policies of the BNDES are often contested, but its organisational capacity is highly regarded.” 

Yet BNDES might not be profitable if its true cost of funding was accounted for. In addition, BNDES enjoys low default rates because it can pick the best borrowers, which should have turned to the market instead, say Mr Musacchio and Mr Lazzarini.

Such arguments even call into question the raison d’être of BNDES. Brazil still only invests 17 per cent of gross domestic product every year — less than the 22 per cent or more needed to raise growth or investment rates in faster-growing Latin American countries such as Chile, Colombia, Mexico or Peru.
Nor has its lending necessarily led to more jobs being created. Mr Musacchio says listed companies that received BNDES funding usually did not increase their capital expenditure plans after receiving the loans. Instead, they used the cheap money to reduce their costs. “They are really lending to firms that don’t need the money,” he says.

That counters Ms Rousseff’s emphasis on policies that help the poor, although BNDES argues that such criticisms ignore its own research which shows the benefits of its programmes, especially for SMEs. It adds that borrowers such as Lojas Americanas receive money at higher rates than the TJLP, while support for JBS has mostly been in the form of equity.

Political impact
 
Arguably more serious, though, are charges that its activities distort Brazil’s macroeconomic and political landscape. Critics say Brasília uses BNDES and other state-run banks to dress up the budget deficit by having it pay dividends to the government from treasury bonds that it keeps on its books.

“You are transforming your own debt into revenue ... which is completely crazy,” says Almeida, a specialist in Brazilian government finances. BNDES denies this is a deliberate government policy.

There are also concerns that BNDES’s cheap capital might undermine the central bank’s efforts to control inflation. Its low rates mean other Brazilians have to suffer higher rates. Studies also show that donors to the ruling party tend to receive more BNDES money. The biggest donor in the 2014 election was JBS, the meatpacking group controlled by the Batista family (no relation to Eike Batista) with BNDES as a shareholder.

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Under pressure over the deficit, the government last month signalled changes in BNDES’s policies. The bank said projects linked to infrastructure, innovation and the environment as well as SMEs would still receive the TJLP rate. But other sectors would receive a mix of subsidised and market rates.

Fonte: aqui

Nova Era do Capitalismo de Laços

Ukraine’s troubled state has long been dominated by its oligarchs. But across the emerging world the relationship between politics and business has become fraught. India’s election in April and May will in part be a plebiscite on a decade of crony capitalism. Turkey’s prime minister is engulfed by scandals involving construction firms—millions of Turks have clicked on YouTube recordings that purport to incriminate him. On March 5th China’s president, Xi Jinping, vowed to act “without mercy” against corruption in an effort to placate public anger. Last year 182,000 officials were punished for disciplinary violations, an increase of 40,000 over 2011.

As in America at the turn of the 20th century, a new middle class is flexing its muscles, this time on a global scale. People want politicians who don’t line their pockets, and tycoons who compete without favours. A revolution to save capitalism from the capitalists is under way.

The kind of rents estate agents can only dream of

“Rent-seeking” is what economists call a special type of money-making: the sort made possible by political connections. This can range from outright graft to a lack of competition, poor regulation and the transfer of public assets to firms at bargain prices. Well-placed people have made their fortunes this way ever since rulers had enough power to issue profitable licences, permits and contracts to their cronies. In America, this system reached its apogee in the late 19th century, and a long and partially successful struggle against robber barons ensued. Antitrust rules broke monopolies such as John D. Rockefeller’s Standard Oil. The flow of bribes to senators shrank.

In the emerging world, the past quarter-century has been great for rent-seekers. Soaring property prices have enriched developers who rely on approvals for projects. The commodities boom has inflated the value of oilfields and mines, which are invariably intertwined with the state. Some privatisations have let tycoons milk monopolies or get assets cheaply. The links between politics and wealth are plainly visible in China, where a third of billionaires are party members.

Capitalism based on rent-seeking is not just unfair, but also bad for long-term growth. As our briefing on India explains (see article), resources are misallocated: crummy roads are often the work of crony firms. Competition is repressed: Mexicans pay too much for their phones. Dynamic new firms are stifled by better-connected incumbents. And if linked to the financing of politics, rent-heavy capitalism sets a tone at the top that can let petty graft flourish. When ministers are on the take, why shouldn’t underpaid junior officials be?

The Economist has built an index to gauge the extent of crony capitalism across countries and over time (see article). It identifies sectors which are particularly dependent on government—such as mining, oil and gas, banking and casinos—and tracks the wealth of billionaires (based on a ranking by Forbes) in those sectors relative to the size of the economy. It does not purport to establish that particular countries are particularly corrupt, but shows the scale of fortunes being created in economic sectors that are most susceptible to cronyism.

Rich countries score comparatively well, but that is no reason for complacency. The bailing out of banks has involved the transfer of a great deal of wealth to financiers; lobbyists have too much influence, especially in America (see article); today’s internet entrepreneurs could yet become tomorrow’s monopolists. The larger problem, though, lies in the emerging world, where billionaires’ wealth in rent-heavy sectors relative to GDP is more than twice as high as in the rich world. Ukraine and Russia score particularly badly—many privatisations favoured insiders. Asia’s boom has enriched tycoons in rent-seeking sectors.

Wanted: emerging-market Roosevelts

Yet this may be a high-water mark for rent-seekers, for three reasons. First, rules are ignored less freely than they used to be. Governments seeking to make their countries rich and keep people happy know they need to make markets work better and bolster the institutions that regulate them. Brazil, Hong Kong and India have beefed up their antitrust regulators. Mexico’s president, Enrique Peña Nieto, wants to break its telecoms and media cartels. China is keen to tackle its state-owned fiefs.

Second, the financial incentives for businesses may be changing. The share of billionaire wealth from rent-rich industries in emerging markets is now falling, from a peak of 76% in 2008 to 58% today. This is partly a natural progression. As economies get richer, infrastructure and commodities become less dominant. Between 1900 and 1930 new fortunes in America were built not in railways and oil but in retailing and cars. In China today the big money is made from the internet, not building heavy industrial plants with subsidised loans on land secured through party connections. But this also reflects the wariness of investors: in India, after a decade of epic corruption, industrialists in open and innovative sectors such as technology and pharmaceuticals are back in the ascendant.

The last reason for optimism is that the incentives for politicians have changed, too. Growth has slowed sharply, making reforms that open the economy vital. Countries with governments that are reforming and trying to tackle vested interests, such as Mexico, have been better insulated from the jitters in the financial markets.

There is much more to be done. Governments need to be more assiduous in regulating monopolies, in promoting competition, in ensuring that public tenders and asset sales are transparent and in prosecuting bribe-takers. The boom that created a new class of tycoon has also created its nemesis, a new, educated, urban, taxpaying middle class that is pushing for change. That is something autocrats and elected leaders ignore at their peril.

Fonte: aqui