Could Covid-19 spark a rebirth of Brazil’s development bank?

Over 68 years, the Brazilian National Development Bank (BNDES) established itself as the most important vessel for infrastructure funding in the country. The bank, however, has been under pressure since the 2014-2016 crisis — which coupled with accusations of political misuse of its funds. Now, amid a pandemic, the BNDES once again becomes instrumental, as one of the government’s main tools to foster investments that may mitigate the economic impacts of Covid-19.

Since the Michel Temer administration (2016-2018), the BNDES has been helping to fill the hole of Brazil’s public accounts by returning billions to the Treasury — an advance of transfers from the Workers’ Party administration, under which the bank’s credit concessions boomed. However, it has also faced allegations of poor management and involvement in corruption schemes and, ultimately, of being a gear in the so-called “fiscal pedaling” that led to former President Dilma Rousseff’s ouster in 2016.

And while the transfer of funds remained under Jair Bolsonaro’s administration, coupled with his pledge to “open the black box of the BNDES” — an investigation which came up empty-handed — it is now one of the main instruments used by the Economy Ministry to provide liquidity to Brazil’s ailing economy. In March, the bank announced BRL 97 billion in funds to boost markets and support small and medium-sized enterprises (SMEs) amid the crisis. These measures included special credit lines for the health sector, suspending debt interest payments for six months, and a special loan program to support SMEs’ payrolls. As of May, roughly BRL 13 billion had been deployed, supporting companies that employ 2.2 million people, according to the bank’s calculations.

In the view of professor Joelson Sampaio, coordinator of the...