Rate used by BNDES in loans is discussed again amid high inflation

Five years after updating the rate used by the BNDES (National Economic Development Bank) in loans to Brazilian companies, the tool is once again being discussed amid the escalation of inflation. This is because part of the cost of Long-Term Interest Rate (TLP), in force since 2018 in the development bank, is linked to the IPCA (Extended National Consumer Price Index).

However, if on the one hand the cost of the TLP is pressured by inflation, on the other hand, the rate has been successful in correcting a series of distortions created by its predecessor, the TJLP, according to experts heard by CNN Brasil Business.

One of them is the development of the market and capital, since there is a reduction in BNDES subsidies.

“The BNDES disbursement fell, private funding increased, people began to borrow through this capital market. Only good projects are financed, and the fiscal impacts of underpay have disappeared. I see it as a success”, says Vinicius Carrasco, former director of BNDES and one of TLP’s idealists. Currently, Carrasco is director of Stone and professor at PUC-Rio.

Since 2018, BNDES has had a significant loss of space in the sector, while the capital market has registered strong expansion. This movement can be seen in the table below, in which data compiled by Inter indicate a significant rise in corporate debt and free credit, coinciding with a drop in earmarked credit, the modality offered by BNDES and other agents.

It is a movement similar to that registered by a study by the Center for Studies of Capital Markets of the Economic Research Institute Foundation (Cemec-Fipe).

Considering the last ten years, the BNDES’ participation in the financing sector dropped from 9.3% in December 2012 to 4.2% in February 2022, more than 50%. In 2018, it was 6.3%.

Corporate debt securities, debentures, rose from 6.1% to 10%.

Bank credit from other sources was at 14.6% in 2012, dropped to 11.1% in 2017 and, in February this year, reached 14.5%.

The study also points out that, as of 2018, the volume of BNDES credit declined year after year, with the exception of a rise of 0.09% in 2020, linked to the context of the pandemic. Debt and equity issues, on the other hand, had the opposite trajectory.

In this sense, Carrasco assesses that the objectives of the founders of the TLP were “fully achieved”.

The TLP began to be discussed as an alternative to the Long-Term Interest Rate (TJLP), used in the government of former president Dilma Rousseff to subsidize investments in the industry.

The biggest criticism leveled against PT’s policy is that the money from the subsidies — coming from the Workers’ Assistance Fund (FAT), made up of taxes, and direct contributions from the National Treasury — ended up benefiting large business groups that did not necessarily need help. governmental.

The subsidies were part of an investment sustainability program, justified by the 2008 global crisis, and which lasted until 2015, when Brazil entered recession.

Among the distortions generated by the TJLP, Carrasco cites the loss of money from the Treasury and the FAT, the viability of projects in the economy that were not the best, affecting productivity, and the lack of seeking credit in the private sector, via loans, issuance debentures or shares, weakening the capital market.

“The objective, therefore, was to create a fee to guarantee adequate remuneration and solve these problems, with private agents looking for private alternatives.”

Alternative

On the grounds that the TLP is getting too expensive, public accounts specialist Fabio Giambiagi, former chief economist at BNDES and research associate at Ibre-FGV, published an article last week advocating a new policy.

According to Giambiagi’s proposal, the TLP would continue to exist, but there would be an alternative, the TNLP, which would be composed of the same rate, but corrected quarterly, and the inflation projection for the next 12 months.

The economist’s argument is that, currently, the TLP reaches a value very close to that practiced by the market, and does not encourage borrowing when there is a prospect that interest rates will fall, since the rate would fall along with the Selic. With the quarterly adjustment, this problem would be reduced.

The objective, he states in an article, is “to develop an instrument that allows for the continuity of long-term investment decisions, without them being affected by the possibility of reducing long interest rates, in the event that Brazil carries out important reforms in the coming years, which collaborate in order to reduce country risk”.

“The measure is intended to enable the public interested in borrowing today indexed to the TLP to have a menu of alternatives, similar to what the Treasury does when it becomes indebted”, writes Giambiagi.

He also highlights that the TLP logic “carries the real cost of financing throughout the term of the contract”, which differs from that practiced with its predecessor, the Long-Term Interest Rate (TJLP).

“The point to be emphasized here is that it is possible to have a market rate, without this necessarily implying disregarding the convenience of having a floating rate, as was the TJLP”, defends the economist.

In addition to TNLP, he also proposes TNLP5, which would have a fixed rate for five years and then be corrected according to “market conditions”.

BNDES “Protagonism”

Proposals such as that of the TLNP, says Carrasco, reflect an effort to recover a “protagonism” lost by the BNDES, but do not seek to “solve a problem of society, the Brazilian economy”.

Regarding the possibility of the TLP variation by interest, he points out that “it is not obvious that the rate will rise or increase, but even if there is a perspective that the rate will decrease, a borrower worried about this can go to BNDES and use another index. , like the Selic, but it does not take it because today the BNDES is not competitive”.

“TNLP does not solve a concrete problem. Is the perception that the pre-fixed component is too high relevant to the borrower? No”, he says.

For him, there is still a risk that the discussions on these proposals open a “Pandora’s box” that leads to the re-establishment of subsidies behind the TJLP.

“It may even have a subsidy, during the pandemic there were a series of credit programs with subsidies, but they were approved in Congress and it was explicit, not implicit like those of the TJLP. Only Congress has this legitimacy, not the BNDES,” he says.

Currently, TLP has a fixed rate valid for the entire length of the loan installment. In addition, part of its value is adjusted by the IPCA. For contracts signed in August 2022, annual interest is defined by the IPCA plus a fixed rate of 5.19%.

The fixed rate follows the 90-day average of the so-called NTN-B, National Treasury bonds, which are traditionally called real interest. Recently, they exceeded 6%, which is reflected in an increase in this rate for loans.

The BNDES itself emphasizes that “the final interest rate of the contracts will be composed of the TLP, the remuneration (spreads) of BNDES and the accredited financial agent (in the case of indirect operations) and the credit risk rate”.