BNDES: Market Savior or Inhibitor?

by Dan Shirai

The BNDES’s mandate in Brazil has been expanded dramatically under the Lula administration. The bank’s 2009 disbursements are expected to top 100 billion reais, nearly three times the IDB’s estimate for 2009 approvals. This year’s BNDES disbursements will be four times what it distributed in 2001.

Amid crisis, the development bank has responded rapidly to a severe liquidity squeeze that began in September by establishing new programs for sectors under pressure. It has set up a series of short-term credit lines to provide working capital and near-term investment financing for companies in need, and sat in on distressed asset sales to ensure the successful creation of national powerhouses like VCP-Aracruz and Sadia-Perdigão.

For many borrowers, the BNDES represents the only hope of obtaining affordable funds, which bankers and economists generally view as positive. “The BNDES has done very...