BNDES: 60 years in support of Brazilian infrastructure

The year is 1952. The world is divided and under a period marked by tension and intolerance played out by the United States on one side and the Soviet Union on the other. The two world powers, representing capitalism and socialism, respectively, wage in what is called an arms race, investing much of their budgets in the production of weapons technologies. Each, in its own way, tries to influence mankind, taking care however not to cause a nuclear world war; a conflict in which there could be no winner. These were the years of the "Cold War”.

In Brazil, Getúlio Vargas has recently taken office as president, his second term by direct vote, while the big star of the moment, the TV, becomes the main spokesperson for the beginning of a process of cultural and behavioral changes, notably among the country’s middle class. Every night the world in black and white invades Brazilian homes, sponsored by "Reporter Esso” (a historic TV news program) which entitles itself the “eyewitness of history”. We are living in what was known as the "golden years”.

Subtle winds of change are already being felt, with progress being made in several areas. But the population of Brazil is predominantly rural and focused on working the fields. According to the 1950 census, that’s 52 million Brazilians, of whom only 36% live in cities. The industrialization process is incipient. Until then, the great exponents of domestic industry are plants that manufacture textiles, food, beverages, tobacco, clothing, leather and animal furs, wood and furniture, concentrated in Sao Paulo. At that time only 40% of Brazilian homes have running water and only 60% have electricity.

It is in this context that, on June 20 1952, driven by the dream of economic power and progress, President Getúlio Vargas passes the law that creates the Brazilian Economic Development Bank (BNDE - Banco Nacional de Desenvolvimento Econômico), whose acronym would only receive an “S” for  “Social”  30 years later.

By assuming the central role in the formulation of a development strategy, Vargas comes to represent the concept of state intervention in directing economic growth. One of the strategic decisions that he takes is to establish the Brazilian Development Bank (today’s BNDES) to finance a major transformation of Brazil on a path toward industrial modernity, eliminating the bottlenecks to the country's progress His model was based on the Marshall Plan - a program created and funded by the United States to rebuild Western Europe after World War 2.

And it was the very end of the Second World War that created some of the conditions that were necessary for the country’s national development project. The conflict had already had a positive impact on the value of domestic raw materials, and even forced the country to replace part of Brazil’s imports with products manufactured domestically. With the end of the war, Brazil accumulated a significant amount of foreign reserves that could be applied in the modernization of its modest industrial park. The initial capital was raised via a surcharge on income, which would be fully channeled to fund the major works that Brazil required.

Thus, the bank becomes the main instrument for implementing the Federal Government’s investment policy; supporting programs, projects, construction works and services that relate to the economic and social development of the country. From the construction of the Paulo Afonso hydroelectric power plant, which went into operation in 1955, to the boom of highway construction projects during the period known as the "Brazilian Miracle" and on to the Belo Monte hydropower plant, whose project is undergoing final analysis, every major infrastructure project in the country has the BNDES brand in its DNA.

Even when Brazil was going through the dramatic moment in the nation’s politics with the military takeover of power through the 1964 coup, the BNDES would open a new front of activity, supporting investment in the private sector, promoting technological development, financing new industries and the purchase of machinery and equipment made in Brazil through the Finame program.

Thus, the institution became not only the indispensable, key piece in the nation’s project of industrialization, but also a great supporter of national engineering and co-responsible for the degree of maturity that the sector has  reached, acting both within the country and abroad.

Products
Throughout the institution’s 60 years of existence, the BNDES has developed several mechanisms and lines of credit for specific finalities and with specific financing terms and conditions. A project of investment can benefit from one or from a combination of several of these lines depending on the segment, the objective of the business venture, and the items to be supported. The products that can be used in supporting the required infrastructure are:

BNDES Finem
Financing, of an amount superior to R$ 10 million (US$ 5.4 Mn), for projects of implementation, expansion and modernization of business ventures. The action of the BNDES under the Finem for support to the sector of infrastructure is divided into five major segments of action:

• Electrical Energy

Support for the expansion and modernization of the sector so as to ensure the supply of electricity with quality, safety and lower prices. It also seeks to increase the number of alternative sources of energy.

• Alternative energy

Support to projects for bioelectricity, biodiesel, bioethanol, wind energy, solar energy, small hydropower plants and other energy alternatives.

• Petroleum and Natural Gas

Support to projects that target increases in domestic production so as to ensure the offer of fuels on the domestic market, contributing toward the development of the market, including activities on new frontiers of exploration of natural gas, in the promotion of biofuels and in the diversification of the energy matrix. The BNDES supports investments that contribute toward the development of the entire production chain in the sector of petroleum and gas.

• Logistics

Support for investments in logistics and transportation infrastructure, including the sectors of highway, railway, marine and air transportation. The BNDES offers specific lines of support for projects that seek solutions for logistics bottlenecks caused by the circling//bypassing of cities and access to seaports. Another priority is investments in railway cargo transportation infrastructure in Brazil’s North and Northeast regions.

• Telecommunications

Support for investments in construction works, installations, services and equipment, with the objective of stimulating the demand for equipment and software supplied by local industry, fostering the technological development of the country and promoting the universalization of telecommunication services.

BNDES Automatic
Financing of up to R$ 10 million (US$ 5.4 Mn) (for large companies) or up to R$ 20 million (for companies of other sizes) for projects of implementation, expansion and modernization of business ventures.

Finame
Financing for the individual acquisition of new domestically manufactured machines and equipment, registered and listed with the BNDES, regardless of value amount.

Finame Leasing
Financing for the individual acquisition of new machines and equipment in leasing operations.

BNDES Card
Revolving pre-approved credit of up to R$ 1 million (US$ 540 thousand) for the purchase of accredited products, supplies and services registered at the BNDES Card Operations Portal, directed to micro, small and medium-sized businesses.

BNDES Credit Limit
Revolving credit for support to companies or Economic Groups that are already BNDES customers with a low credit risk.

BNDES Bridge Loan
Financing of a project granted in specific cases to speed up the realization of investments through the concession of funds during of the long term operation.

BNDES Project finance
Financial engineering supported under contract by the cash flow of a project, with the assets and accounts receivable of the business venture itself serving as collateral.

BNDES Sureties and Guarantees
Provision of sureties and guarantees by the BNDES aiming to reduce the level of participation in the financed projects.

The BNDES can also support investments in logistics through the ‘Fundo da Marinha Mercante’ - (FMM - Merchant Marine Fund). It also offers the BNDES “Cities” program to provide support for the preparation of urban development plans and executive projects for infrastructure and public urban utilities, and the ‘Propae’ to support investments in production and improvement of infrastructure in the country’s states.

To provide support for projects that contribute toward the development of the Chain of Suppliers of Goods and Services associated with the sector of Petroleum and Natural Gas, there is the BNDES P&G program.