Narratives and Public Policies: The Case of the Brazilian Development Bank

ABSTRACT

Over the last decades, the Brazilian Development Bank (BNDES) has been the main source of long-term credit for investments in Brazil. However, from the mid-2010s onward, the fiscal costs of the subsidized credits provided by the bank have been increasingly stressed, configuring a second narrative of its role in the Brazilian economy. Based upon a review of the most frequently cited and most relevant academic articles about the BNDES published between 2005 and 2019, this paper analyzes these competing narratives and their impact on the public policies adopted to foster investments in the country. In a context marked by lower market interest rates and by an increasing capacity of large companies to obtain long-term credit from non-governmental sources, the second narrative prevailed over the last years and led to a law reform in 2017 to reduce the subsidies provided by the bank. The paper empirically demonstrates a narrative shift that influenced public policies regarding development banking and shows how changing settings affect the interest groups’ capacity to disseminate their narratives.

KEYWORDS:

• Development banking
• Brazilian Development Bank
• public policies
• narratives
• Brazil

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. In Portuguese, “Banco Nacional de Desenvolvimento Econômico e Social”.

2. Retrieved from https://goo.gl/mmNDmQ.

3. Retrieved from https://cutt.ly/So9G8K3. Data refer to Dec. 31^st 2019. Conversion to USD based upon the exchange rate reported by the Brazilian Federal Revenue Office.

4. Retrieved from https://cutt.ly/ko9K85z.

5. See, for example, the analysis presented by the National Treasury in 2017. Retrieved from https://goo.gl/Tk9xfA.

6. Retrieved from http://goo.gl/y9zcBM.

7. In the first case, interest rates are below the opportunity costs for the National Treasury. In the second case, the National Treasury covers the difference (“equalizes”) payments in order to make operations more attractive to the investors.

8. More details on the fiscal costs of the BNDES can be found in Mendes (2014b), Musacchio and Lazzarini (2015) and Cavalcante (2018). The National Treasury also registers data on those costs as a result of law 13.132/2015.

9. BNDES economists argue that the fiscal costs of the bank might be counterbalanced by increasing tax revenues that would stem from the investments that resulted from the bank subsidies (Pereira & Miterhof, 2018).

10. See, for example, Jaramillo-Vallejo (1994).

11. Retrieved from https://goo.gl/mmNDmQ.