Transcript bndes - Initiative for Policy Dialogue

Financing development
The strategic role of development banks (and the case of BNDES)
IPD/JICA Task Force on Industrial Policy and Transformation
Meeting in Jordan, 5-6 June 2014
João Carlos Ferraz
Executive Director
Guide
Development and development financing
The awakening of the Sleeping Beauty: Development Banks are
back to the game
BNDES contribution to Brazilian development
Reflections about the future of development institutions:
missions, assets, capabilities
As a way of introduction
// 3
Market based financing can be relied only partially for
development purposes, especially for the financing of industrial
policies where uncertainty prevails
Development institutions are strategic instruments to support
sustainable development in every country, at any stage of
development
Each development bank is a singular institution. No role model
exists
Analytical references
Market failure
Uncertainty
Finance scarcity
Market failures and/or incomplete financial systems are only partial
justifications for an active role for development banks. Even more
important is the prevalence of and the need to tackle uncertainty
(technical change, climate change, growth cyclicality, etc) by patient,
mission oriented institutions.
Development and development financing
The awakening of the Sleeping Beauty: Development Banks are
back to the game
BNDES contribution to Brazilian development
Reflections about the future of development institutions:
missions, assets, capabilities
Development Institutions: common but very
relevant institutions
// 6
A very common institution:
OECD: institutions providing long term financing that are beyond
the capacity or the willingness of others to do so.
BDC (2009): 235 DIs in 92 countries.
International Benchmark Study on Development Institutions. Business Development Canada, 2009
WB (2012): 90 DIs in 61 countries.
Global Survey of Development Banks. Policy Research Working Paper, n. 5969. Washington: World Bank, 2012.
Different types of Development Institutions: Development
Banks, Specialized Agencies (Credit, Guarantee or Equity),
Development Financing Institutions (usually multilateral)
The awakening of the Sleeping Beauty?
// 7
“An Infrastructure Bank (IB) … There are good theoretical reasons for the creation of such a bank.
(LSE Growth Commission, 2013)
“Once a financial crisis hits, it is too late… institutions must already exist, with a clear mandate,
experienced professional staff, and the financial capacity to respond to the financial needs when the
private market fails.” (Conference Board of Canada, 2010)
New Institutions…. in Developed Countries…..
BPI France
2012. Merger of three existing institutions
Korea Development Bank (KDB)
Current government: The Korea Finance Corporation will be merged with KDB.
Only subsidiaries not related with development activities will be privatized.
Japan Finance Corporation (JFC)
2008. Merger of existing institutions. JFC funds other banks (with fiscal resources) during
crisis, natural disasters and fosters national priorities (sustainability and innovation).
Green Bank UK
2012: Foster environmental and energy efficiency investments
Development Institutions: not one alike
// 8
Not a homogeneous group, differing in:
Ownership structure (fully vs. partially owned by government)
Target sectors and clients (narrow vs. wide focus)
Lending models (first-tier vs. second-tier)
Credit conditions (subsidized vs. market interest rates)
Regulation and supervision (special regime vs regime applicable to
all banks)
Corporate governance (independent vs. government controlled
boards)
Size (absolute and relative), loan portfolio, performance
indicators…
Economic relevance
// 9
Assets/GDP - 2012
19.4%
16.3%
14.5%
12.7%
11.2%
8.3%
5.9%
4.7%
2.6%
KfW - BNDES Germany Brazil
CDB China
KDB Korea*
ICO - JFC + JBIC DBs
Spain
- Japan Mexico*
VEB Russia
BPI France*
1.7%
DBSA South
Africa
2012 total assets: US$ 3.2 trillion
Source: Annual reports and IMF. * KDB – Korea: The new government of South Korea is reversing the previous government’s plan for KDB’s privatization. DBs Mexico: NAFINSA (SMEs),
BANOBRAS (Infrastructure) and BANCOMEXT (Exim). BPI France: The institution was created in December 31th, 2012. Don’t include the CDC enterprises, merged in June, 2013.
Scale and scope matters
Number of segments supported X number of instruments and asset size:
Select International Development Finance Club (IDFC ) members (2012)
Source: Annual reports.
Each and every priority requires specific expertise, financing instruments and
compatible funding
Anti-cyclical role
// 11
Annual growth (%) of credit portfolio of selected development banks
CDB - China
30
25
20
15
10
5
0
2005
Source: Annual reports.
2006
2007
2008
2009
2010
2011
2012
Development and development financing
The awakening of the Sleeping Beauty: Development Banks are
back to the game
BNDES contribution to Brazilian development
Reflections about the future of development institutions:
missions, assets, capabilities
Brazilian financial markets: robust but shallow
// 13
Credit and corporate bonds , % of GDP, 2011
SPAIN
200
NETHERLANDS
USA
JAPAN
150
Credit/GDP
CHINA
100
KOREA
50
BRAZIL
MEXICO
-
5
Source: BIS and World Bank, 2011
10
15
20
Corporate Bonds/GDP
25
30
35
40
Outstanding Loans/GDP and Outstanding Loans/Total Credit
Selected Development Banks, 2012
21,0
Role of BNDES due to
limitations of Brazilian
credit market?
15,5
11,3
12,7
12,4
8,0
7,4
4,6
KDB
Source: Annual reports, BNDES
BNDES
Outstanding Loans/GDP
CDB
Outstanding Loans/Total Credit
KfW
BNDES scope and priorities
// 14
2/3 of long term loans in
Brazil (US$ 85 billion, avrg
Priorities
annual disbursements)
Instruments
Direct Operations
Indirect Operations
MSME (financing and
guarantee)
Exports
Project finance
Grants
Investment bank
Equity Portfolio
Source: BNDES
Infrastructure
Competitiveness
inclusion
Estimated market value (US $ b.) 45.4
Nº firms with direct support
Nº Investment Funds
Productive
203
44
BNDES relative performance and funding
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Funding
By Constitution, 40% of
proceedings from Workers’
Assistance Fund (FAT), a public
fund financed by a levy on wage
bills to provide unemployment
benefits and retraining. No
amortization schedule exists.
Since 2008, very long term
loans from Treasury adding up
to US$ 200 billion
2012 (US$ billion)
BNDES
Assets
Outstanding
Loans
Net Profit
KFW
CDB
367.8
657.3
1,191.6
254.0
526.4
1,016.9
3.0
3.1
9.9
ROE (%)
12.5
11.5
13.4
NPL (%)
0.06
0.21
0.30
Source: Banks' balance sheets.
Sources of funding for
annual budget
Market
11.5%
FAT 2.8%
Treasury
8.3%
Return on
operations
77.4%
Source: BNDES
 Largely, funding and financing is referenced to the
“TJLP”, Long-Term Interest Rate which is lower than
the market based short term rate
BNDES contribution to investment
// 16
Disbursements 2004-2014 (US$ billion)
Disbursements
2011
2012
89.9
2010
88.3
2009
79.8
2008
82.9
95.7
2007
68.4
23.6
2006
49.5
19.3
2005
Source: BNDES
33.3
13.6
2004
2013 2014*
*12 months, up to February/2014
Asset growth in 3,000 industrial firms, 2010:
Firms supported x non-supported by BNDES
Jobs created and/or maintained during the investment
phase of a project (direct, indirect and income effects
Non-Supported
firms
21%
Supported
firms
10%
23%
0%
5%
10%
15%
Investment without BNDES
Sources: Seasa and BNDES
20%
25%
Induced by BNDES
30%
35%
BNDES contribution to policy priorities (1/2)
// 17
Disbursements according to industrial policy priorities
US$ billion
Priorities are fine-tuned to policy
priorities
Active contribution to the
formulation and implementation of
public policies, especially in the
domains of industry, innovation
and infrastructure
Provider of technical expertise for
the modeling of complex projects
Activity
Unit
Hydropower
MW
Small Hydro
MW
Windpower
MW
Termal power plants
MW
Automobile
1.000 cars
Bioethanol
million tons
Pulp
1.000 ton/year
Total
Projects
Installed projects
supporte
capacity 2007d by
%
2007 (A) 2013 (B) (B/A) BNDES BNDES
74.937 12.253
16% 11.893
97%
1.820 3.260 179% 1.994
61%
247 1.997 809% 1.093
55%
21.229 23.418 110% 5.400
23%
3.500 1.000
29%
465
47%
385
235
61%
75
32%
7.530 6.205
82% 5.515
89%
Source: ANEEL, EPE, ANFAVEA, BRACELPA, BNDES.
All energies: 2007 capacity based on EPE estimate based on integrated system
Source: BNDES
BNDES contribution to policy priorities (2/2)
// 18
Support for MSME: disbursements + number of firms
32
350
300
23
250
100
8
261
55,0
275
11
12
41
53
2007
2008
45,0
35,0
172
25,0
15,0
104
50
0
25
231
200
150
25
65,0
5,0
2009
Number of MSME, 1,000
2010
2011
2012
Disbursements, US$ billion)
2013
-5,0
// 19
Development and development financing
The awakening of the Sleeping Beauty: Development Banks are
back to the game
BNDES contribution to Brazilian development
Reflections about the future of development institutions:
missions, assets, capabilities
Missions: inclusive, sustainable, competitive
development
// 20
Directives
Patiently face and deal with uncertainty
Support policy development and long term planning
Finance expansion of capacity, capabilities and learning; fill
gaps; fix failures; induce externalities.
Foster a long term financing industry
Contribute to systemic stability (anti-cyclical role)
Appropriate and distribute (to society, via the State) returns of
(financial) investment decisions
Assets and capabilities
// 21
Tenacious pursuer of priorities defined at the political domain and
by challenges associated with the stage of development of a country
Mandate enforced at the highest political level
Servant of public interest must pursue efficiency and effectiveness
Stable funding for financial sustainability
Flexible competences to mobilize resources and instruments
adequate to mandates and to country's needs
Development Institutions:
not the vanguard nor the rearguard …
the co-guard of development
Financing development
The strategic role of development banks (and the case of BNDES)
IPD/JICA Task Force on Industrial Policy and Transformation
Meeting in Jordan, 5-6 June 2014
João Carlos Ferraz
Executive Director