2012 Money and Banking Conference. Buenos Aires, October 1st, 2012

Ferraz, João Carlos

Biblioteca Digital do BNDES

Biblioteca Digitalhttp://www.bndes.gov.br/bibliotecadigitalCentral Banks, Financial Systems and Economic Development:  The experience of Development BanksJoão Carlos FerrazJoão Carlos FerrazVice PresidentCentral Banks, Financial Systems and Economic DevelopmentThe experience of Development Banks2012 Money and Banking ConferenceBuenos Aires, October 1st, 2012Not an exception but very common institution: in countries under different regimes, at different stages of development.BDC (2009): 235 DIs in 92 countries.International Benchmark Study on Development Institutions. Business Development Canada, 2009 WB (2012): 90 DIs in 61 countries. By 2009, total assets of US$ 2.01 trillion; loan portfolio of US $1.59 trillion.Global Survey of Development Banks. Policy Research Working Paper, n. 5969. Washington: World Bank, 2012.Different types of Development Institutions: Development Banks, Specialized Agencies (Credit, Guarantee or Equity), Development Financing Institutions (usually multilateral)Development Institutions: very common and most relevant institutions2OECD: institutions providing long term loans that are beyond the capacity or the willingness of others to do so.After 2007/8, “rediscovery” of DBs: Confidence builder, long term financing, risk mitigating institution.  But not at all without controversy! For: Crowding out private industryHaving discretionary power (“pick winners”)Being an ambiance conducive to cronyismDevelopment Banks: what they are3Not a homogeneous group, differing in: Ownership structure (fully vs. partially owned by government)Target sectors and clients (narrow vs. wide focus)Lending models (first-tier vs. second-tier)Credit conditions (subsidized vs. market interest rates)Regulation and supervision (special regime vs regime applicable to all banks)Corporate governance (independent vs. government controlled boards)Development Banks: not one alike4BNDES Main provider of long-term financing in Brazil 100% state-owned company  under private law Stable funding 2,500 employees Instruments Direct operations Indirect operations MSME (financing & guarantee) Exim Project finance Equity investments GrantsBNDES at a glanceG ross F ixed  C ap ita l Form ation (G FC F) &  B N D ES d isbu rsem ents(U S$ B illio n)G FCFBN D ES d isbursem en t fo r G FC F (* )1001502002503003504004505002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110102030405060708090(* ) exc. B N D ES Exim ; w orkin g ca pita l, M & A  a nd  Equ ity  F in an cing.BNDES contribution to investment and employment10,1% 10,9%12,1%11,4%12,5% 13,0%22,6%19,7%21,7%3,5% 3,9% 4,1%4,4%5,3%7,2%10,8%9,9%10,5%0%3%6%9%12%15%18%21%24%27%2003 2004 2005 2006 2007 2008 2009 2010 20110%2%4%6%8%10%12%14%16%18%20%Source: BNDES Investments supported by BNDES / Total investment (GFCF)Jobs created ou maintained due to BNDES / Total formal employment at the end of the year56Funding CompositionPrudential behavior2011 - Basel Indice: 20.6% - NPL/total loans: 0.14% Source: BNDESFunding and financial performanceRecent demand expansion  and crisis firmly supported by National Treasury Institutional Funding (by Constitution, 40% of Worker Assistance Fund)Sound financial performance2011 - ROE: 23.1%- Assets: US$ 340 billion- Equity: US$ 32.8 billion67% 66%53%40%30% 23%8% 6%16% 38%46%50%8% 7% 6%4% 4% 4%7% 9% 16%12%8% 13%10%10% 12% 9% 6% 13%0%20%40%60%80%100%2006 2007 2008 2009 2010 2011Institutional Nacional Treasury Foreign Others EquityBNDES annual disbursementsConverted to US dollar on disbursement dates35,1 4047,1 52,364,992,2137,4168,4139,73482,396,371,649,824,119,813,811,70204060801001201401601802003 2004 2005 2006 2007 2008 2009 2010 2011R$ Billion US$ BillionGrowth rates receding to allow for “crowding-in” of private industrySource: BNDESShare of Direct & Indirect operations (%)Capillarity ensured by accrediting & providing funds to commercial banks. Risk of operations is theirsDisbursements4434665747414347454658464656575355544254545953 432000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 set/11Direct Operation Indirect Operation78Financing by type of clientsShare of MSMEs in total disbursementN° of MSMEs supported in 201145.83557.480109.121176.678235.984050.000100.000150.000200.000250.0002007 2008 2009 2010 2011Cartão BNDES:- 510,000 active cards- 2011: R$ 7.6 bi- 2012: R$ 11. bi (expected)85.5% of townships with active operations with BNDES credit card for SMEsSource: BNDES21,5%31,8%35,9%41,4%24,0%24,8%15%20%25%30%35%40%45%2007 2008 2009 * 2010 * 2011 up to march 2012Disbursements by business sector (%)Source: BNDESDisbursements by sector2,63,9 4,0 3,95,96,44,26,68,311,36,70,02,04,06,08,010,012,02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Support for exports – US$ billionExport Financing (US$ billion)BNDES support for export of high value added products (capital goods) and engineering servicesSource: BNDESInfrastructure financing is expected to grow at 20% annually up to 2015Industrial Policy Priority Sectors: 55% of total46% 48%40%50% 53%40% 43%46% 47%32%35% 30%38%36% 33%40%39% 35% 31%40%12%14% 17%9% 7%8% 6% 5%6%7%7% 8% 5% 5% 7%12% 12% 14% 16%21%2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Industry Infrastructure Agriculture Commerce & servicesBNDES as an Investment BankSource: BNDES. BNDES Equity Portfolio (USD million) BNDES Portfolio in PE/VC FundsUSD million (April/2012) – USD/R$ = 1,90 Brazil´s largest investor in PE & VC BNDES brand attracts new investors Long experience: 35 years involved with capital markets66,860,522,528,249,725,359,175,652,450,848,125,113,412,28,46,90,010,020,030,040,050,060,070,080,02005 2006 2007 2008 2009 2010 2011 mar/ 12US$ billionMARKET VALUE  COST VALUE  3718671EducationFund Focus# Funds# Corps.AllCommit. EquityBNDES Commit. EquityInnovation 9 100 247 95Infrastruct 7 45 2.176 448Governance 4 20 482 84Environment 3 5 745 205Regional 2 10 79 14Agribusiness 2 8 598 119Food 1 4 49 11Total 29 199 4.562 1.0131011Finance expansion of capacity, fill gaps, fix failures, induce externalities…Foster an innovative, sustainable long term financing industryContribute to systemic stability (anti-cyclical role)Appropriate and distribute (to society, via the State) returns of (financial) investment decisionsScope of potential contributions to development12Political priority: The role/mandate of a DB must be enforced at the highest political levelStable funding: the basic asset to finance long termScale and scope: A DB must have the means  – resources and instruments- for accomplishing mandates. Capacity to change: Flexible adaptation to different stages and momentum of a country development.Competences and values: a servant of public interest; effectiveness and efficiency; team player: an instrument to build the future.Essential assets and capabilitiesOf course, these assets are not “ready made”…Development Banks, financial industry and economic developmentEach Development Bank is a singular institution. No role model exists.As market based finance has proved to not induce sustainable development, a stronger configuration for a national finance industry is where private and public institutions co-live (But… attention!!! Time and place do matter in defining the mode of relation. Again, no role model exists…)A Development Bank should not be the vanguard nor the rearguard but the co-guard of development13João Carlos FerrazVice PresidentCentral Banks, Financial Systems and Economic DevelopmentThe experience of Development Banks2012 Money and Banking ConferenceBuenos Aires, October 1st, 2012

Central Banks, Financial Systems and Economic Development: The experience of Development Banks

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Central Banks, Financial Systems and Economic Development: The experience of Development Banks

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