BNDES plans to diversify portfolio with Arab partnership
04 de outubro de 2017
Paulo Rabello de Castro, president of the Brazilian Development Bank (BNDES), spoke at the Arab Chamber this Wednesday about a new phase for Brazil, in which the bank should invest in new sectors with Arab funds.
São Paulo – The Brazilian Development Bank (BNDES) plans to open new investment portfolios in different sectors and wants to partner up with Arab investors to do it. The plans were unveiled this Wednesday (4) by the bank’s president, Paulo Rabello de Castro, in a lecture presented at the Walid Yazigi auditorium, in the headquarters of the Arab Brazilian Chamber of Commerce in São Paulo.
Castro’s lecture was the kickstart of a partnership that will see the Arab Chamber and BNDES work together to expand the flow of trade and investment between Brazil and Arab countries. The bank’s president talked about the diversification of investments via BNDESPar, its branch that holds equities in companies, and said that it doesn’t make sense for the bank to just “sit” on Petrobras, Vale, JBS, and others. “We want to invite investors from Arab countries to be with us in these (new) investments,” said Castro.
He said that the bank’s technical staff is very good and that BNDES has a track record of good investments. “BNDES is highly profitable in its portfolio selection. This is the best presentation card for Arab investors. They don’t need to do ‘pit stops’ in other places. Let’s go together, let’s go with the bank’s own expertise,” he said.
According to the BNDES’ president, even in JBS, the meat processing company that saw its leaders involved in graft accusations, the bank didn’t have losses. “We didn’t lose anything and we will win a lot still, as soon as their governance improves and modernizes,” he said. In these possible investments in partnership with the Arabs, Castro also wants the financial private sector to participate by intermediating or appointing others to join in.
While praising the actions of president Michel Temer, Castro said that Brazil needs a reconstruction process and that it should adhere to a new geopolitics, one of production, productivity, trade and peace. According to him, the relations with Arab countries and BNDES’ role are included in this new phase. “The Arab countries, with all their potential, with all of their centrality in global geopolitics, will be privileged partners in this process,” he said.
He said that some countries, such as Arab ones, have very distinguished relations with Brazil due to the Brazilian miscegenation, which they are a part of. “We are here today to realize that, to capture this proximity and make it operational,” said Castro.
The BNDES’ president presented federal government investment data, which shouldn’t even reach 0.5% of Gross Domestic Product (GDP) this year, at less than BRL 20 billion (USD 6.46 billion), and recalled that this number once reached BRL 100 billion (USD 32.32 billion) or more. “This year we have bottomed out,” he said, reminding that the government has plunged into a fiscal crisis. However, he sees this as an opportunity for growth because he believes that the current scenario is the bottom already.
Castro believes that the Arab countries can enter this recovery process by Brazil. “We need these resources, from the Arab people, who are prominent savers,” he said. Castro said that Brazil can offer legal and political security that these funds will be respected. “But they have to be respected essentially and mainly through a simple thing: profitability,” he said.
The bank’s president showed interest in attracting Arab capital for the infrastructure of a “new Brazil”, which, according to him, is being outlined in the near future. He also said that the country would like to increase finished goods and services exports to the Arab market, but also showed willingness to give something back with the increase of Brazilian purchases of oil and fertilizers and the promotion of tourism in the Arab world. “To have Brazilians, who will prosper, discover the tourism routes of Arab countries, who have a lot to show, and to have people spend a portion of what we earned with our exports,” said Castro.
He said that BNDES has been working to offer predictability to investors and that the country’s MPs should be invited to prioritize investments. According to him, investment should be the only mandatory item in Brazil. “That was left aside in the Constitution Amendment on spending cuts,” he said. Castro compared the lack of predictability and growth in the country to a journey without destination. “We have to say that next year, in March, how much the country plans to grow in the four-year term between 2019 and 2022,” he said, mentioning the month in which the country will host the Brazil-Arab countries Economic Forum, in São Paulo, with the organization by the Arab Chamber.
The BNDES’ president also pointed out that the Brazil-Arab connection goes back a thousand years. “Since the Moorish were over there in Portugal, we’re together ever since,” said Castro, following up with a poetry on the topic: “We are together in our language, our habits, we can’t be any closer than we are because we are entangled as we always have been. Therefore, it’s more a question on how to recognize that our DNA carries everything that we want now to recover in a more purposeful way,” he said.
The Big Three
During the event, Castro talked about other topics, such as the Brazilian long-term interest rates, which he calls “pornographic.” “High interest rates bring about economic pornography in Brazil,” he said. “He also talked about the scenario faced by the country’s industry sector, which is “really bad,” and mentioned that the main problem in Brazil is the macroeconomics agenda: interest rates, taxes and Social Security. “If you put it in a VAT, it will only pay 40%,” he said on the taxes paid in the country. These are the Big Three (Trio Maravilha) of our macroeconomic hell,” joked Castro on the interest rate, taxes and Social Security.
The BNDES president presented a chart with BNDES’ funding sources, showing that the Treasury is at the top, trailed by the Workers Suppor Fund (FAT) and PIS-Pasep. “The bank is owned by the workers, not the federal government.” The data presented by Castro says that the bank wants to change this scenario, increasing the participation of external funding in the bank’s resources and decreasing the Treasury’s participation.
In a press conference after the lecture, Castro talked about the possibility of a new debt payment by BNDES to the National Treasure. Last week, the bank paid in advance BRL 33 billion (USD 10.67 billion) to the Treasury, but the federal government has been asking that in 2018 the bank pay up another BRL 130 billion (USD 42.02 billion). “A repayment for 2018 is materially very improbable. These resources won’t be there, period. Unless we scrabble for pennies, but that wouldn’t make for very prudent cash management,” he said.
In the lecture, Castro also criticized the banks slightly on the release of funds to companies through BNDES Giro, the bank's funding line to supply working capital. “The financial system better run and take their clients before we start to meet all the clients and dismiss those that are not doing their job,” he said.
To the audience, Castro mentioned the Long-Term Rate (TLP), which will replace the current Long-Term Interest Rate (TJLP) in the bank and will be applied to part of its loans. He said that the TLP is making the bank get out of its comfort zone and go to battle.
Journalist Cláudio Gradilone moderated the lecture and the debate that followed. Gradilone is the Finance editor at IstoÉ Dinheiro magazine, and also worked at other major media outlets in Brazil, such as newspaper Gazeta Mercantil and Exame magazine. The lecture’s opening speech was delivered by the Arab Chamber’s president, Rubens Hannun.
*Translated by Sérgio Kakitani