The Brazilian government’s changes to the laws governing its tax-exempt debentures have allayed financial market fears that president Lula intends to rely on BNDES to fund billions spending on infrastructure, crowding out private-sector finance.

BNDES’s record profits in the first quarter of 2022 (up 32% over the first quarter of 2021 to R$12.9 billion) point to something transformational going on at the state-owned development bank. Led by president Gustavo Montezano since July 2019, BNDES also made R$34.1 billion ($6.68 billion) in 2021 – a record year and 65% above 2020.

Plans to incentivize foreign capital aim to boost capacity, with a new internal ‘investment bank’ to drive growing pipeline.

Gustavo Montezano has been president of BNDES since July 2019. He is on a mission to get Brazil’s state development bank to adapt to the new financial reality of ESG. How the resultant tensions play out will be crucial to the development of Brazil and the world.

Investment bank steps in as BNDES stops crowding out; an important first in local-denominated financing of large project puts down marker.

The blueprint for BNDES is for a development bank that partners with the private sector to facilitate more socially beneficial projects while using less capital. Eliane Lustosa, BNDES director of capital markets, is at the forefront of this challenge.

Brazilian Development Bank wants to finance more projects with a lower level of disbursements; local capital markets seen as better bet than banks to help BNDES step back.

With a struggling economy, Brazil will continue to rely heavily on its state development bank to provide long-term finance for crucial infrastructure projects, unless private-sector alternatives can be found.

It has become normal in Brazil for private-sector banks to express frustration with the scale and cost of BNDES’ presence in financing corporate Brazil. However, given the power of the bank to engage with private-sector financial institutions (either through granting debt lines that are passed through the private banks, or from holding equity stakes in companies that the banks see as clients or potential clients), these criticisms are made off-the-record.

BNDES to spend $250.8 billion 2013-16; also seeks to encourage private capital inputs.

No support for Rodovias do Tietê issue; Rotas das Bandeirantes refinancing blocked.

Brazil needs huge sums to develop its infrastructure but long-term project finance is becoming harder to find as European banks pull back and the dominant role of development bank BNDES discourages local players.

Development bank does not want to grow credit book; Bonds expected to take bigger role in project finance

Development bank crowds out private sector; But has vital role in infrastructure development

The Brazilian National Development Bank (BNDES), is fishing for extra funds after recalculating its plans and projecting that it will lend as much as 15% more than expected for the 2008-11 period, as it seeks to step up its investments in infrastructure. BNDES president Luciano Coutinho has been talking about growth of 10% in lending for infrastructure projects, focused on energy, communications, railways, ports, and water and sanitation. The bank has already announced that it needs an extra R$25 billion ($14 billion) for next year, prompting speculation about how the money will be found.