BNDES steps up amid ‘tough times’ for Brazil market

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The Brazilian economy faces a tough year ahead and, as a result, BNDES should play a bigger role in the capital markets than it did last year, said a senior official at the development bank. Luciana Costa, director of infrastructure, energy transition and climate change, also said the bank’s focus will be on using its vast resources to bring more investment to areas such as infrastructure. “These are tough times because high interest rates and the recent peak in the dollar rate had a huge impact in the economy, and expectations have changed,” she said Thursday during a panel at the LatAm Capital Markets Summit, held by LatinFinance at the New York Stock Exchange. Costa noted that Brazil has been able to achieve higher than expected growth and to reduce unemployment in recent years even though the central bank has kept interest rates high. ADVERTISEMENT But she acknowledged that high rates are a structural problem for Brazil, and at some point they may affect companies, especially smaller ones. The key to changing this situation is to keep inflation under control, and for that the government will need “to be able to manage expectations,” she said. INFRA GAP When that happens — Costa suggested next year is a possibility — companies are expected to look at capital markets to raise ever more funding to invest in infrastructure. “The stock of infrastructure compared to GDP in China is 78%, and in India it reaches 56%,” she said. “In Brazil it is just 34%.” The Brazilian development bank is the world’s largest infrastructure lender and will play a key role in narrowing that gap, she said. “BNDES’ balance sheet is very unleveraged. Our Basel level is 32%, we have plenty of room to keep financing corporates and individuals,” Costa said. “BNDES plays a very important role as anticyclical agents and we tend to increase our activity during tough times.” PRIVATE-SECTOR ALLY The bank will continue its pursuit of a more market-friendly approach that started in 2023 by avoiding the crowding out of the private sector from infrastructure financing — historically a criticism directed at the bank. “Despite the fact that we have a very solid balance sheet, in Brazil we have so much to do that we need to team up with the private sector,” Costa said. The focus, she added, is on finding innovative solutions to help banks and other players to play a larger role in infrastructure financing, while de-risking projects, offering longer tenors and anchoring deals, among other approaches. Another priority for BNDES is to spur the secondary market for infrastructure debentures, which offer tax advantages for investors and issuers.