bad jabuticabas and the elephant in the roompolicydialogue.org/files/events/background... ·...
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BNDES BAD JABUTICABAS AND THE ELEPHANT IN THE
ROOM
ROGERIO STUDART
DISTINGUISHED FELLOW, GLOBAL FEDERATION OF COMPETITIVENESS COUNCILS
NON-RESIDENT FELLOW, BROOKINGS INSTITUTION
Prepared for the seminar, “The Future Of National Development Banks Carnegie
Endowment, Washington DC”
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JABUTICABA: THE FRUIT
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SUMMARY ON BNDES: NOT A JABUTICABA, BUT EXTREMELY GOOD FRUIT
1. ☑︎Provides finance to sectors that knowingly do not have access to private capital (SME) – BNDES has done that, and this was particularly expanded from the 2000s
2. ☑︎ Is aligned with a national development strategy, promote transformational investments that are critical in different stages of development (infrastructure, technological innovation and now greening)
3. ☑︎ Promoted exports and internationalization of national companies
4. ☑︎ Counter-cyclical role – BNDES played this role just like most NDBs and RDBs and MDBs
5. ☑︎ Use public resources but also leverages private capital – bridge loans, blended lending to reduce overall cost of capital, guarantees to mitigate risks
6. ☑︎ Promotes innovative instruments and “financing architecture” to crowd in private capital
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TWO EXTREMELY BITTER JABUTICABAS IN BRAZIL
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BAD JABUTICABA 1: INFRASTRUCTURE, UNFINISHED TRANSFORMATION
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INFRASTRUCTURE GAP IS SIGNIFICANT
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INFRASTRUCTURE INVESTMENT % GDP
Total Electricity Telecommunications Water and sanitation Transportations
1971-80 5.42 2.13 0.8 0.46 2.03
1981-89 3.62 1.47 0.43 0.24 1.48
1990-2000 2.27 0.76 0.73 0.15 0.63
2001-14 2.16 0.64 0.63 0.19 0.7
5.42
2.13
0.8 0.46
2.03
3.62
1.47
0.43 0.24
1.48
2.27
0.76 0.73 0.15 0.63
2.16
0.64 0.63 0.19 0.70
1
2
3
4
5
6
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MIND THE GAP: INFRASTRUCTURE SPENDING/ GDP – 1992-2011
Most of this
determined by Brazil
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JABUTICABA 2: FINANCIAL SECTOR, NOT “FUNCTIONAL”
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PRIVATE BANK CREDIT: TOO LITTLE, TOO SHORT
Indicator Value Global rank Year
GDP, billion USD 2417 7 2014
Per capital GDP 11728 59 2014
GDP per capita, PPP 15162 72 2014
Human Development Index 0.755 75 2014
Bank credit to the private sector,
percent of GDP 67.09 44 2014
ATMs per 100,000 people 129.25 8 2014
Stock market capitalization, percent of
GDP 34.91 38 2014
Stock market turnover ratio 85.62 8 2015
22%13%
51%8%
6%
14%
Banco do Brasil
CEF
BNDES
Private Banks
Other
Brazil: Loans with maturities of three years or more
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MARKET CAPITALIZATION: BEHIND THE CURVE
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NOT EVEN INSTITUTIONAL INVESTORS WANT TO TAKE LONG-TERM ASSETS
14
TRENDS IN ASSET ALLOCATION – A GLOBAL SEARCH FOR YIELD
Although funds surveyed are of a different nature, the survey reveals a clear trend in alternative assets
The survey shows a clear increase in alternatives amongst both LPFs and PPRFs, yet more mixed results in
equities. While allocations to alternatives have increased, LPFs have not turned to the equity markets to
increase returns, on average. With now several years of buoyant equity markets, forward-looking return
expectations in equities have been lowered while volatility expectations remain elevated, prompting LPFs
to lower equity allocations in favour of alternatives.
Historical asset allocation for a group of 34 LPFs and 19 PPRFs from the survey supports this trend21
. LPF
allocations to alternatives (including infrastructure) increased from 14.3% of total assets in 2010, to 15.3%
in 2014 (Figure 3), on average. Shifting market values factor into changing asset allocation; however,
given that equity markets have advanced through most of this time period, it appears that on average, funds
have been reducing equity exposure in favour of larger alternative investment allocations. Fixed income
allocations increased slightly over this time period for LPFs.
Figure 3. Historical average asset allocation of select Large Pension Funds (LPFs) and Public Pension Reserve Funds (PPRFs) 2010-2014
As a percentage of total assets
Note: Values are a simple average invested in each asset category for all LPFs and PPRFs, from which actual asset allocation was available in the periods 2010-2014, independently of their size in terms of assets. A total of 34 LPFs submitted asset allocations over the five-year period ending in 2014, a subset of the total survey population; 19 PPRFs submitted asset allocation data over the four-year period ending in 2014, also a subset of the total 2014 survey population. Asset allocation totals may not add to 100% due to rounding. Source: OECD calculations based on responses to the OECD Survey of LPFs and PPRFs..
21 34 LPFs reported asset allocation over the past five years for this historical analysis, which is a subset of the 2014-2015 total
survey population.
Government
bonds
17%
Private
bonds
3%
zInvestment
funds: fixed
income
52%
Equity
10%
Investment funds:
equity
9%
Real estate
4%
Structured
investments
Operations with
fund members
Other investments
Total:
R$ 750 bi
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THE ELEPHANT IN THE ROOM
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PLANO REAL: A STROKE OF GENIUS
The “Real” Plan
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MAIN CHARACTERISTIC OF THE POST-HYPERINFLATION MACROECONOMIC SETTING
• Law of fiscal responsibility – does bring discipline by also also rigidity given the structure of
spending and the commitments, some related to the social debt and inherited infrastructure
gaps - and limits enormously fiscal countercyclical policies
• ”Floating Exchange rates”, in a country with increasing pass-through and concerns about
inflationary shocks
• Independent Central Bank with the mandate centered on inflation targeting –
only…
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A LONG AND WINDING ROAD
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MACROECONOMIC POLICIES: COUNTER-INTUITIVE MONETARY POLICY
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INVESTORS’ BEHAVIOR: NOT A JABUTICABA
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PUBLIC DEBT AND INTEREST RATES: PERVERSE RELATIONSHIP
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RATE OF RETURN ON RISK-FREE ASSET (I.E. TREASURY BONDS)
-4
-2
0
2
4
6
8B
razi
l
Russ
ia
Colo
mbia
Chin
a
Arg
entina
India
South
Afr
ica
Mexic
o
Chile
Indonesi
a
Mal
aysi
a
Phill
ipin
es
Tai
wan
Turk
ey
Polla
nd
Thai
land
South
Kore
a
Synga
pore
Aust
ralia
Isra
el
Gre
ece
Japan
Ital
y
Swit
zerl
and
Holla
nd
Port
uga
l
Hunga
ry
Fra
nce
Can
ada
Hong
Kong
Spai
n
Aust
ria
Denm
ark
Germ
any
Cze
ch R
epublic
Belg
ium
Sweden
United S
tate
s
United K
ingd
om
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THAT IS NOT ALL…
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SOME RECENT CHANGES
• Horizontal x vertical approach
• Focus on sustainability
• The TJLP rate will be replaced for a new benchmark rate (TLP) starting in 2018 for new
operations.
• BNDES will assume a role in guaranteeing infrastructure loans by allowing other lenders
access to collateral from borrowers
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TJLP WILL BE REPLACED BY TLP
4
Finalmente, a Figura 3 mostra a evolução da rentabilidade da NTN-B de 5 anos e da
TJLP, acrescidas do spread médio praticado pelo BNDES, 2,5% ao ano, entre 2002 e
2016. Trata-se portanto do custo par as empresas tomadoras em cada uma dessas
duas opções. Comparativamente à TJLP, o uso da NTN-B de 5 anos como indexador do
empréstimo teria introduzido um aumento brutal na volatilidade da taxa final
praticada pelo banco de desenvolvimento. Além disso, teria provocado um aumento
substancial no seu custo final. Assim, se uma empresa tivesse contraído um
empréstimo em dezembro de 2002 e liquidado integralmente o principal e juros desse
empréstimo em dezembro de 2016, o custo do empréstimo indexado à NTN-B teria
sido três vezes maior do que tivesse sido contratado com base na TJLP.
Figura 3. Evolução do Custo Final da Dívida do BNDES para as Empresas com Indexação
Alternativa à TJLP e à NTN-B de 5 anos, entre 2002 e 2016
Fonte: BNDES
23,3
40,3
21,4
8,7
16,0 17,9
13,1
21,9
14,3
13,0
14,8
8,8
6,7
10,5
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
NTN-B + 2,5%
TJLP + 2,5% aa
Source: ErnaniTorres (2017)
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PLINIA CAULIFLORA OR THE “JABUTICABEIRA”
Plinia cauliflora, the Brazilian grape tree, or jabuticabais a tree in the family Myrtaceae, native to Minas
Gerais and São Paulo states in Brazil
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THANK YOU
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CROWDING-OUT?
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PPI: TOTAL LOW AND MIDDLE-INCOME COUNTRIES
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LATIN AMERICA AND THE CARIBBEAN
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BRAZIL
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CHINA