Author: Leonardo Attuch

Source: ISTOÉ Dinheiro - SP - ECONOMY - 09/11/2009

Within a few days, Guido Mantega is expected to sign a billionaire check - one of the largest of his tenure at the head of the Ministry of Finance. The amount may reach R $ 100 billion, which would come directly from the National Treasury, in Brasília, to capitalize on the BNDES, on Avenida Chile, in downtown Rio de Janeiro, repeating a loan operation already made earlier this year.

With so much money, BNDES should consolidate itself as the largest development bank in the world. With loans of R $ 128 billion in the last 12 months, equivalent to US $ 73,1 billion (at an exchange rate of R $ 1,75), it is already much larger than the World Bank (US $ 27 billion), the Inter-American Development Bank (US $ 11 billion) and the United States Eximbank (US $ 12 billion) combined.

It would be more accurate to label it as a commercial bank. Especially because the BNDES 'company financing portfolio also exceeds that of Itaú-Unibanco, Bradesco, Santander and Banco do Brasil. "We have not yet defined the value," Minister Mantega told DINHEIRO, on Thursday 5, in London, where he participated in meetings with international investors.

The minister's advisers, however, guaranteed that the figure should reach R $ 100 billion, guaranteeing resources for the bank not only in 2010 but also in 2011 - which would avoid risks of a discontinuity in the institution's policy in the first year of next government.

The decision should come out later this week, when Mantega will meet with BNDES president, Luciano Coutinho, in Brasília. And, as a public bank becomes one of the largest financial institutions in the world, using subsidized money, some questions are necessary and urgent. With what criteria does he lend these resources? Why do you choose certain companies and not others?

And, more importantly, why, in certain cases, does the BNDES not only finance projects but also become a direct partner of the companies, acquiring control shares? In shareholdings alone, BNDES has invested more than 70 billion in recent years - and many of these choices, such as that of Frigorífico Independência, proved to be wrong.

With the answer, the bank's president, Luciano Coutinho, an economist and former professor at Unicamp: “Our criteria are objective and transparent,” he told DINHEIRO, also from London, where, last week, he opened an international branch of the Bank. “We don't choose winners, nor are we a business hospital,” (read his interview on page 58). His right hand at the BNDES, the executive João Ferraz, who is the Planning director, also denies that the bank has made bad bets. "Our investment success rate is quite high," he said.

Ferraz claims that the bank's financing created 2,8 million jobs in 2008. These numbers are difficult to measure, but the fact is that the current policy of the BNDES is quite different from those that have existed in the past. Throughout its history, the bank has followed different guidelines, but it has never had as much weight in the economy as it does now. Created in 1952 by then President Getúlio Vargas, it emerged to support industrialization and plan long-term development.

It financed steelmakers and auto parts companies. In the 70s, with the military, the bank was governed by the “import substitution” rule. This meant supporting sectors of the economy in which Brazil was still an importer, such as, for example, petrochemicals. There was a tripartite policy, in which multinational companies, private sector agents and state-owned companies came together to build a new sector of the economy.

In the 80s, the bank was transformed into an authentic hospital, helping any struggling company. It also created uncompetitive organizations, such as companies that were born under the Informatics Law, even earning the nickname "Recreio dos Bandeirantes" - where industrialists from São Paulo could obtain easy money for projects of dubious feasibility.

In the following decade, the decade of the 90s, the bank became the great organizer of privatizations - not only designing the sales model of the state-owned companies, but also participating in the purchasing consortia. In all cases, the policy could be right or wrong, but it was relatively clear.

In the Lula era, the BNDES has done everything, protected by the diffuse concept of “developmentalism”. Under this umbrella, subsidized financing can be provided to multinationals, assistance to companies in difficulties, such as Aracruz and Sadia, and the sponsorship of major mergers, such as Oi with Brasil Telecom, with a nationalist bias.

The big issue is that BNDES funds come out of the taxpayer's pocket. One of the bank's main sources of funding is the Workers' Assistance Fund, with FGTS resources, which are compulsorily collected. With this money, which yields only 3% to the worker, BNDES makes long-term loans through TJLP, which is set at 6% per year.

The bank's second source of funds has been the National Treasury. In this case, the account is passed on to the entire society, as the Treasury raises funds at a higher rate than the TJLP - the Selic rate, used in bonds issued by the government, is at 8,75% per year. "BNDES receives money from father to son and should use it in noble activities, to create new things, not to finance what already exists," said professor Carlos Lessa, who was the first president of the BNDES in government, to DINHEIRO Squid.

In addition, Lessa, one of the bank's six former presidents heard by DINHEIRO, is also an unsuspected critic for being considered one of the main economists aligned with “developmentalist” thinking. One of its main complaints is the fact that the BNDES finances multinationals, which would have full access to the global capital market.

In 2006, even outside the bank, Lessa bought a public fight with the government when criticizing a closed 497 million operation with Volkswagen, when the company threatened to fire workers and even close its São Bernardo do Campo plant.

After that, the gate opened and the main automakers sought new resources on Avenida Chile, presenting very generic investment projects - in no case, it was a new factory. On August 13, 2008, Ford obtained R $ 78 million for “engineering projects”.

On November 17 of the same year, Renault raised R $ 315,3 million to support the production of Logan. A month later, Fiat took R $ 407 million to modernize factories and "update its production lines". And, in May this year, GM obtained R $ 194 million for the “development of a compact line”. According to another former president of the BNDES, the economist Márcio Fortes, the bank has a kind of fixation with the automobile sector.

"They give rivers of money to the automakers, without it being necessary at all, as the companies are multinationals." In the last 12 months, the BNDES carried out 124 direct operations in the industrial area - the automakers took 10% of the resources. They were behind ethanol companies, with 15%, and food companies, with 28%.

Lessa and Fortes argue that, in several of these cases, companies can carry out simple interest rate arbitrage - raising 6% per year and investing in the CDI, which yields almost double. In addition, as these are subsidized resources, there is pressure within the government itself for BNDES not to become a state within the machinery of the state.

For more than three years, the Federal Internal Affairs Department has been trying to raise details about the bank's operations, but the data has been denied by the board, on the grounds of bank secrecy. “We have a duty to control and carry out audits”, says Minister Jorge Hage, from CGU. "And we can do that without violating bank secrecy."

The economist Gil Castello Branco, who heads the NGO Contas Abertas, also says that society has a duty to know the criteria for financing and choosing partners - especially now that it is present in almost all major businesses that take place in Brazil. “Does the bank do what society really wants?”, He asks.

In many cases, the answer is unlikely to be positive. In the case of Independência, BNDES acquired a 21% stake in 2008, paying R $ 250 million. The company, which belongs to brothers Miguel and Roberto Russo, defaulted on the bank, paralyzed its activities, delayed payments to ranchers and today has a debt of almost R $ 4 billion.

“BNDES 'credit analysis, in this case, was disastrous,” the director of a large private bank told DINHEIRO. In the slaughterhouse world, the bank also invested more than R $ 2 billion in the Bertin group, which ended up being sold to JBS-Friboi, after being practically in white bankruptcy.

Braspelco, a leather company, also defaulted on BNDES and later transferred its assets to another company, called Xinguleder, which was controlled by the former partners and continued to operate the factories. In the sugar and alcohol sector, there were several missteps. The bank's two main bets were Brenco, which received a loan of R $ 372 million, last year, and Santelisa, which took R $ 500 million in equity, also in 2008.

Mired in debt, the two groups ended up being sold - the first to Odebrecht's ETH, and the second to the French group Louis Dreyfus. And the curious thing is that, in this second case, the BNDES had entered into the operation to build a large national group of ethanol, under the command of the Biagi family, from Ribeirão Preto.

In the end, the bank ended up as a minority of a French group. The only exit door for this investment will be a possible launch of shares in the Dreyfus group. "The IP is in our plans and will be good for all shareholders", summarizes the CEO of the new company, Bruno Melcher.

In many of these cases, what can be questioned is an eventual lack of judgment by a bank that, in recent years, has acted as if it had an obligation to set disbursement records every year, as if that were synonymous with efficiency. Luciano Coutinho took over the bank just over two years ago, with loans of around R $ 60 billion and more than doubled the volume. And although the bank played an important role in overcoming the international credit crisis that occurred in late 2008, there seems to have been some exaggeration.

"The BNDES is working as if its source of resources were inexhaustible," economist Luiz Carlos Mendonça de Barros, who was also president of the bank, during the FHC administration, told DINHEIRO. "They decided to shoot all over the place and that can lead to distortions and losses."

The institution's profit, which was R $ 5,3 billion in 2008, fell to 702 million in the first half of this year. Mendonça de Barros also criticizes the use of a patriotic and nationalist discourse to foster major mergers. In the case of the so-called national “supertele”, the result of the merger between Oi and Brasil Telecom, BNDES lent R $ 2,6 billion to two controllers of (Andrade Gutierrez and La Fonte) so that they could buy the shares of two partners who leaving the telecommunications sector (Opportunity and GP).

Fund, thanks to the bank's policy, it was possible to pay a considerable premium on the exit - the amount paid per Brasil Telecom common share, of R $ 54,3, is practically double the current price of the paper. And even though banker Daniel Dantas is almost a public enemy of the Lula government, the fact is that his group, Opportunity, received a valuable prize in the sale of Brasil Telecom.

Such situations have also occurred in other recent mergers, blessed by the bank.

In the operation between VCP and Aracruz, BNDES lent more than R $ 2 billion to Votorantim so that the Ermírio de Moraes family group could acquire the shares of the Lorentzen, Safra and Moreira Salles families in Aracruz - and the entire operation's premium, financed with money of the worker, was concentrated in the common shares, of the controllers.

In a more recent case, that of Brasil Foods, Perdigão also received funds so that it could buy shares in Sadia, from the Furlan and Fontana families, well above the offers that the company had been receiving in the market.

In these cases, the BNDES entered the operations claiming the need to avoid the denationalization of companies and also took away from the partners the commitment to avoid layoffs. But in August of this year, the super-screen laid off 1,1 people. Brasil Foods also cut a hundred vacancies in its administrative area.

Aracruz, in turn, sold one of its main assets - the Guaíba plant, in the metropolitan region of Porto Alegre - to a Chilean group, in a transaction of US $ 1,4 billion, closed in early October. In other words: although it continued to be a Brazilian - and that was the pretext for BNDES 'help - one of the most important pieces of ancient Aracruz today is Chilean.

"This role of the company's hospital must be carefully managed to avoid favor and distortions," economist André Franco Montoro Filho, also a former president of the BNDES, told DINHEIRO. Another business group that has already resorted to the bank's coffers was Globopar, a holding company of the Marinho family, in 2002. Two years later, the public bank also acted in the sale of NET, which belonged to Globo, to Telmex, of the Mexican Carlos Slim.

In addition to hospital operations, the BNDES has also shown a certain predilection for some sectors of the economy. However, instead of adopting a horizontal policy, financing all players in a given segment, BNDES elects its “national champions”. In the beef sector, the Marfrig and JBS-Friboi groups raised funds for some of their international acquisitions at the BNDES and thus became multinationals.

These two cases have so far been successful. But in a parallel sector, that of milk, the results of the BNDES 'policy are questionable. First, the bank lent almost R $ 1 billion to the Bertin group, so that the slaughterhouse would acquire the Vigor brand of the Mansur family. Months later, Bertin himself began to operate with difficulties. Then, the bank acquired a 35% shareholding in Nilza, from businessman Adhemar de Barros Filho, who is now in bankruptcy.

Finally, it invested more than R $ 300 million in the company Bom Gosto, owned by businessman Wilson Zanatta, both in stock purchases and in loans. And the fact is that, BNDES subsidized aid for some and not for all, ends up distorting the competition. In less than ten years, the Zanatta company jumped from a revenue of just over R $ 5 million in 2000 to around 1,5 billion this year. “My biggest impulse to grow, in fact, came from BNDES,” said Zanatta to DINHEIRO.

"But they joined Bom Gosto because the company is solid". The sector, however, today has several companies in the red. The BNDES has been so ubiquitous in the Brazilian economy that it has aroused criticism from analysts of various ideological colors. The former president of the Central Bank, Armínio Fraga, has said that the bank should "wean" companies.

Even before Fraga, BC President Henrique Meirelles himself went so far as to say that corporate credit in Brazilian private banks is only more expensive than it should be due to the fact that BNDES drains all demand for long-term corporate financing. Meirelles received so much artillery from within the government that he never brought it up again.

Two years ago, there was a time when many had the impression that Brazil would finally have matured. In 2007, companies raised R $ 115 billion in the capital market, with their launches of shares and issuance of debentures, above the volume of BNDES disbursements. But the international crisis and the collapse of the stock markets prevented that trend from consolidating.

"Today, the BNDES and the market are complementary forces in the Brazilian economy", evaluates Francisco Gros, another former president of the bank, who was the father of the "BNDES card", an idea that facilitated the access of official resources to medium and small companies . Today, the bank operates with 27 credit lines and 75 financial institutions are authorized to transfer their funds.

One of the most accurate criticisms of the bank's tentacle performance has been made internally. Economist Fábio Giambiagi, a career official at BNDES, is one of the organizers of the book Brasil post-crisis, in which the role of development institutions is discussed. Among the proposals, that the BNDES stop supporting companies with full access to the capital market, increase the transparency of their actions and include professional advisers on their board, who represent society.

And, finally, to focus on more priority projects, on infrastructure. “Many sectors are already mature and the focus today should be technological innovation”, reinforces Luiz Carlos Delben Leite, also the bank's former president. Today with the direct link between Avenida Chile and the National Treasury, the government works as if resources were unlimited. Days ago, President Lula authorized the bank to create a line of R $ 4,8 billion to build football stadiums, as if there were no paying public to be consulted.