The BNDES, along with other institutions, had undeniable historical importance in the process of economic and social development in Brazil. However, considering that development itself produces great transformations that can eventually make its promoting institutions redundant and idle, it is critical that the bank's role be constantly discussed.

Does Brazilian development still need to be promoted by a public bank? If so, is the current BNDES such a bank? These are some questions guiding the study by economist João Furtado, titled "Towards a new development, a new BNDES", which is available in its entirety on the IEDI website. This Letter summarizes the main proposals for reformulating BNDES actions. Thus, the IEDI continues the reflection on the future of the BNDES, which has been the subject of previous publications, such as Letter n. 828 — "The future of the BNDES."

The answer to the first question guiding  the work of Furtado is affirmative, since markets and development banks complement each other in order to promote the advance of economic activity. The mission of development banks is precisely to use assessments that differ from the market's to stimulate investments that generate benefits for society as a whole, but whose private return is —momentarily or temporarily — insufficient under the existing market conditions.

The private credit market may require investment projects to have shorter maturities and faster returns, as well as lower capital intensity and risk level, than a development bank may demand. Above all, private lenders have no economic incentive to calculate spillovers or social returns, even when they publish environmental or social reports.

Therefore, the existence of a development bank is far from being a "jabuticaba" (TN: a particularity) of the Brazilian economy. There are more than 500 such banks in the world, and their numbers have increased again after the severe global crisis of 2008. However, neither Brazilian historical experience nor international experience are sufficient to justify the existence of this structure in Brazil. It is necessary that the performance of the BNDES continue to be a lever for development.

From this point of view, criticisms of BNDES are partially justified. A first point of condemnation is the one most echoed by the press and various instances of society: the favoring of specific groups for reasons unrelated to fostering development. Without belittling its importance, this is an easy-to-solve issue, through strengthened governance, including independent councils and councilors with defined mandates without the possibility of renewal, and operating rules that make public the minutes of board and councils meetings.

More important is a second level of criticism that concerns the very nature of BNDES interventions. One must acknowledge that after the II PND (1975-79) there was a huge expansion of the bank's functions (coordinator of privatizations, financier of exports and of mergers and acquisitions in Brazil and abroad, agent of industrial and technological policy and of countercyclical policies), motivated by specific demands emerging from circumstantial events or from momentary political arrangements. In addition, the prevalence of very high interest rates over a long period substantially reduced the universe of feasible investment projects under "market" conditions, overloading the BNDES's role as an agent that makes viable productive enterprises.

Thus, the actions of the bank were amplified without, however, making them more coherent. From the great craftsman and operator of Brazilian industrialization and its infrastructure bases, the bank went on to carry out a number of actions that are circumscribed —although relevant— and span to all areas where urgent needs have been identified by governments. The key to the future of the BNDES is rescuing its enormous and irreplaceable mission of promoting Brazilian development.

The major challenge of a development agenda for our country is reinvigorating its capacity for growth, which, in addition to macroeconomic stability, requires the creation of technological capacities that foster the updating of production standards (leveraging productivity), marketing and competition. Such capacities must be built inside companies, across sectors, in productive chains and in agglomerations (clusters, industrial districts, local productive arrangements). Appropriate funding conditions to (all sizes of) companies' efforts to build technological capacity should be a priority over all others, guiding BNDES activities.  Thus, the mission of promoting productivity would become the main mission of the BNDES.

In the recent past, many attempts in this direction were initiated and stopped before they could bear fruit. Governments, even when re-elected, have much shorter mandates than the maturity period of investments in new technological areas; it takes time for them to generate the structural changes that are essential for the Brazilian industrial system to go through the strengthening process without which it can not survive on a longer horizon, especially in the face of the advent of Industry 4.0. Since most of development objectives transcend any presidential or legislative mandate, the BNDES should be a kind of guardian of the constitutional missions for Brazilian development.

In an attempt to contribute to the debate about the building of the BNDES that the Brazilian development needs, some proposals are summarized below:
 

• Redesign and expansion of Finame's scope, with a lower concentration of operations on firms that manufacture trucks, buses and the like; reformulation of FINAME's register to privilege the instruments of productivity diffusion and to offer to producers and users the conditions to accelerate the adoption and the migration to new generations; inclusion of all kinds of services in the set of FINAME-eligible items, with emphasis on technological services, design, and engineering, exporting, training in lean manufacturing and advanced manufacturing consulting, among others.

• Finame Productivity, for subsidized acquisition of products and services that promote business productivity and production chains, concentrated in 3 axes: a) chains with exporting potential (FINAME - EXPORT); b) "wage goods" sectors to help fight inflation (FINAME - CONSUMPTION); c) infrastructure projects to remove bottlenecks, leading to investment savings (FINAME - INFRAESTRUTURA). This program could have an Industry 4.0 strand.

• Creation of an investment fund in technology-based and innovative companies, not with the objective of supporting startups or emerging technology-based companies in general, but to perform a precise and relatively well defined delimitation of this universe: companies that hold technologies which can serve to substantially raise the productivity of the economic system. 

• Establishment of a "program to support the creation of world-class Brazilian products and services" designed to project promising Brazilian goods and services in the quest for relevant slices in world markets; in this effort, it is crucial to recognize that the only way to make viable the increasing (and sometimes gigantic) investments in R&D and in advertising&marketing is by means of a denominator (market size) that goes far beyond what a single country represents.

• Creation of a "program to support the internationalization of companies with technological purposes to reach new positions in the value chain". Contact with the rest of the world and exposure to new sources of competition and new opportunities for acquisition of skills and resources are important sources of dynamism and strength to companies. The program’s support should be limited to the acquisition of technological assets and similar ones (eg. design, well-established brands, or certifications to broaden market horizons).

• Funding of commercial warehouses and technological incubators for small and medium-sized Brazilian companies abroad (Silicon Valley, China, Germany). The aim would be to establish incubation bases for national firms with technological potential in economic spaces of high technological dynamism, where their chances of turning their projects into world-class products or services exist.

• Internationalization program to conquer new markets, since only a few dozen Brazilian industrial and service companies have a relevant presence in other markets with activities that go beyond exports. It must be acknowledged that technologies are increasingly world-wide and that no company confined to a national space will be able to keep up with the technological developments that originate in a multiplicity of economic poles.

• Support to the Low Carbon Economy, recognizing that Brazil may suffer restrictions on its exports in a scenario of mandatory reductions of carbon emissions.

• Development of technologies to reconcile family farming and environmental services in order to avoid rural desertification. This effort should promote the translation of scientific and technological research of a more academic nature into technologies, techniques, equipment and artifacts that allow a significant increase in labor productivity and reduce the agonizing nature of agricultural and rural disputes in general. 

• Support for energy transition, given that, despite the recent measures in favor of wind and solar energy, Brazil remains far from a vigorous and consistent initiative towards the new technologies that are fueling the development of equipment manufacturers and of the use of renewable energies by both industries and households.

The full text is available in Portuguese.