New BNDES president has mission of unlocking credit

The new president of the Brazilian Development Bank (BNDES), Paulo Rabello de Castro, will have at least two priority missions at its helm: normalizing the clearance of loans — whose pace, despite a little higher in the last month, would still be short of what is considered desirable and lower than the repayments of past loans — and pacifying the workforce, in crisis with predecessor Maria Silvia Bastos Marques, because of what they would consider lack of a more emphatic defense of the officials in face of charges against the development bank.

One goal the government outlined is to ensure that at least the amount of new credit be equal to the volume repaid by companies. There is concern about the growing cash reserves of the bank, which would already be around R$150 billion, because of higher repayments than loan disbursements. That is, by balancing inflows and outflows, the bank’s cash pile would stop growing and at the same time there would be a help to the economy and a softening of the criticism from businesses, especially from the manufacturing industry.

One government official said that easing the tensions among the staff alone would help “unlock” credit, taking it to a level more compatible with the current economy, which is attempting a recovery. In the view of this official, with the crisis involving the employees, there would be a greater difficulty of making the bank operate more normally.

“It is not about making anything crazy, but the bank was operating below what it could,” the official said, also pointing out that the work done by Ms. Marques left the institution prepared to lend more, in line with an economic activity moderately rising.

On the 29th of May, President Michel Temer had a meeting with Mr. Rabello de Castro and the ministers of Finance, Henrique Meirelles, and Planning, Dyogo de Oliveira, to outline tasks for the new member of the government economic team.

Speeding up the bank’s lending was a subject of the meeting. The view, one official said, is that the problem of weak credit disbursements would be related to the bank’s operational issues, due to the bureaucracy that Ms. Marques was allegedly having difficulty to overcome, and not to a political definition of contracting the bank’s lending.

During her tenure, the bank always claimed the drop in loans would be related to low business demand, because of the severe recession in which the economy plunged in 2015. Businesses, however, especially in manufacturing, said the bank’s credit contraction was higher than the drop in demand. The debate even led to a meeting of Mr. Temer with Ms. Marques in March for her to clarify the situation.

More recently, Ms. Marques got closer to the manufacturing industry and there was some improvement in the data of disbursements, whose pace of decline decelerated in the first four months in relation to the cumulative data in 12 months.

In São Paulo, Finance Minister Meirelles praised the choice of Mr. Rabello de Castro. He stressed the fact that he is “a liberal economist who believes in the market.” Mr. Meirelles also praised the work of Ms. Marques.

Source: Valor Econômico