The new presidents of Brazil’s state-owned banks—the National Bank for Economic and Social Development (BNDES), Banco do Brasil, and Caixa—took office on Monday in Brasília. President Jair Bolsonaro and Minister of the Economy Paulo Guedes signaled that the institutions might shift from the strategies adopted by previous administrations. It was not completely clear, however, what their new guidelines would be.
During a press briefing, Mr. Bolsonaro said his goal was to make state-owned banks more transparent, in what was a dig at the opposition, especially the Workers’ Party. On his Twitter profile, the president said that he will “disclose” the “black box of the BNDES.” “Many contracts have been undone and will now be exposed,” he declared. According to the new president, the bank was used as political currency by previous administrations. In his speech at the inauguration of the new bank presidents, Paulo Guedes said that the financial institutions were victims of “fraud, looting, and robberies.”
According to Sérgio Giovanetti Lazzarini, an economics professor at Insper, Mr. Bolsonaro needs to be more specific about what information he is looking for. “The bank has tried to be more transparent in disseminating its results and analyzing the impact of its programs,” he says. The data concerning who has borrowed money from BNDES is available online, he highlights. There is room for improvement on controversial loans, such as those made to other countries, Mr. Lazzarini says, but the bank has “evolved a lot in recent years.”
State-owned banks: higher interest rates for the middle class
Pedro Guimarães, the new president of Caixa Econômica Federal, said the bank should take its subsidiaries public. Caixa is also expected to strengthen real estate financing through the capital market and invest in microcredit at lower interest rates to attend lower-income citizens, he believes. He also indicated that interest on real estate financing for the middle-class might rise. Mr. Guimarães said that Caixa will make an initial offering of shares (IPO) for its subsidiaries in the areas of card transactions, insurance, asset management, and lotteries.
Joaquim Levy, the president of the BNDES and former finance minister during the Dilma Rousseff government, said the bank should work in partnership with the market to develop new tools. He also said that it is necessary to make the bank less dependant on the National Treasury. In his opinion, the institution must combat patrimonialism and distortions created in previous governments. Under his leadership, Mr. Levy said, the BNDES will promote “a new cycle of development, with a more open economy and more space for the private sector and the capital market.”
One area of particular concern is the use of these institutions for political purposes. There is a tendency to make loans to “political allies and employing politically connected people”. Strengthening the governance of the state-owned banks should be a priority for the Bolsonaro government, Mr. Lazzarini believes. One such example of “employing politically connected people” was announced on Tuesday, with Rossell Mourão, son of vice president General Hamilton Mourão, being awarded a promotion within Banco do Brasil. Mourão Jr. will now serve as a special advisor to the bank’s new president, Rubem Novaes, tripling his salary in the process.
This news comes one day after Mr. Novaes said he intends to implement an “efficient, transparent and honest” management, declaring there will be no “political interference” at the bank. He also said he intends to sell “some assets,” but didn’t say which ones. The so-called “crown jewels”—the administration of funds, payment methods, insurance, and credit for individuals and small and medium enterprises—will not be negotiated, according to Mr. Novaes. After the ceremony, speaking to the press, the new president of Banco do Brasil also said that the new government will give fewer subsidies to the rural sector.
Changes in Brazil’s state-owned banks started during the Temer administration
Professor Sérgio Lazzarini economist believes the current government has “rightly stated” that public banks cannot continue to support large entrepreneurs who can get loans in other ways, including through private banks.
Changes began in Michel Temer’s government. “The BNDES, for example, has already started to return funds from the Treasury and is inclined to focus its loans on areas of greater need (infrastructure, for example)”, he says. Mr. Lazzarini hopes that this trend is accentuated in the current government. He believes that state banks are strategic for the Brazilian economy and they should be geared towards generating social impact and serving the most vulnerable groups.