1. Financing Development: the case of BNDES
May 2012
João Carlos Ferraz
Vice President

2. A Development Bank should be:
Arguments
A Development Bank should be:
neither the vanguard or rearguard but the co-guard of sustainable development
an instrument to:
fill gaps, fix failures, induce externalities
foster an innovative, sustainable long term financing industry
an agent of systemic stability
a competent institution in appropriating and distributing (to society, via the State) benefits of its intervention 2 2 2 2

3. The Brazilian economy: trends
Social and economic inclusion
Macroeconomic stability
Investment expanding ahead of GDP growth
Challenges: innovation capabilities and efficiency of private and public sectors 3

4. Industrial Policies since 2004
PITCE ( ): Industrial, Technology and Trade Policy
Foster technology based sectors
The return of Phoenix
PDP ( ): Productive Development Policy
Innovate and invest to sustain growth
Riding favourable winds and the storm
PBM ( ): Plano Brasil Maior
Innovate to compete; compete to grow
Against a hostile environment, aggregate value through innovation
Long term policy but adaptable to face unexpected challenges
Industrial policy: a team player of development policies 4 4

5. BNDES in a nutshell
Since 1952, BNDES flexibly adapted to different stages of Brazil's development. It has always had the means –political influence, resources and instruments- for accomplishing mandates
Now, the economic horizon is extending. Investment may lead the way. Long term financing is a decisive factor & BNDES will be present. But, two challenges ahead:
Untangling and paving the way for the private long term financing industry to “crowd in”.
BNDES evolving towards: complex financing for infrastructure; support for “intangibles”; innovative instruments for widening access 5 5 5 5

6. BNDES has a very prominent role in long term financing in Brazil
BNDES role in long term financing and as a counter cyclical agent
Growth of disbursements for capital goods acquisition and GFFC (3Q08 = 100)
BNDES has a very prominent role in long term financing in Brazil
PSI
Investment Support Program in which interest rates were reduced by an equalization program of Finance Ministry 6 6
Source: Brazilian Central Bank
Data from Brazilian Central Bank based on banks´ balance sheets – Dec 2011 6 6

7. Scale and scope matters
Main provider of long-term financing in Brazil
100% state-owned company under private law
Institutional funding
2,500 employees
Instruments
Direct operations
Indirect operations
MSME (financing & guarantee)
Exim
Project finance
Equity investments
Grants 7 7

8. Funding and financial performance
Recent demand expansion and crisis firmly supported by National Treasury
Funding Composition
Institutional Funding
(by Constitution, 40% of Worker Assistance Fund)
Source: BNDES
Sound financial performance
2011
ROE: 23.1%
Assets: US$ 340 billion
Equity: US$ 32.8 billion
Prudential behavior
2011
- Basel Indice: 20.6%
- NPL/total loans: 0.14% 8 8 8

9. Disbursements
BNDES annual disbursements
Growth rates receding to allow for “crowding-in” of private industry
Share of Direct & Indirect operations (%)
Source: BNDES
Converted to US dollar on disbursement dates
Gráfico em: J:\Arquivos_XLS\BNDES Institucional.xls
Source: AP/DEORC US$ Performance Report
Despite the international financial crisis, that became more severe in 2008’s second semester, BNDES’ performance broke a record in Disbursements amounted to R$ 92.2 billion. This number represents a growth of 42% as compared to It is worth noting the dramatic rise of disbursements rates, of 26.5% between 2006 and These amounts reveal expanded investments in the Brazilian economy bringing significant impact on the creation of new jobs, increase of the GDP, greater income per capita and social development.
A return to investments is underway in Brazil and is expected to remain strong in the coming years. The BNDES’ disbursements closed 2009 at R$ billion, an increase of 49% in relation to 2008, while approvals, at R$ billion, rose 40%. The BNDES’ performance shows the strength of the Brazilian economy and reflects the success of the steps taken by the government to face the international financial crisis.
Total disbursements include secondary market investments.
Capillarity ensured by accrediting & providing funds to commercial banks. Risk of operations is theirs

10. Financing by type of clients
Share of MSMEs in total disbursement
21,5%
31,8%
35,9%
41,4%
24,0%
24,8%
15%
20%
25%
30%
35%
40%
45%
2007
2008
2009 *
2010 *
2011
up to march 2012
85.5% of townships with active operations with BNDES credit card for SMEs
N° of MSMEs supported in 2011
Cartão BNDES:
510,000 active cards
2011: R$ 7.6 bi
2012: R$ 11. bi (expected) 10
Source: BNDES

11. Disbursements by business sector (%)
Disbursements by sector
Disbursements by business sector (%)
Infrastructure financing is expected to grow at 20% annually up to 2015
Industrial Policy Priority Sectors: 55% of total
Export Financing (US$ billion)
2,6
3,9
4,0
5,9
6,4
4,2
6,6
8,3
11,3
6,7
0,0
2,0
6,0
8,0
10,0
12,0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Support for exports – US$ billion
Source: BNDES
Fonte: Performance Report (gráfico ínterno no próprio .ppt)
The BNDES core business is the industry and infrastructure financing.
BNDES support for export of high value added products (capital goods) and engineering services
Source: BNDES

12. BNDES Equity Portfolio (USD million) BNDES Portfolio in PE/VC Funds
BNDES as an Investment Bank
BNDES Equity Portfolio (USD million)
BNDES Portfolio in PE/VC Funds
USD million (April/2012) – USD/R$ = 1,90
Brazil´s largest investor in PE & VC
BNDES brand attracts new investors
Long experience: 35 years involved with capital markets
Source: BNDES. 12

13. Development financing: food for thought
Each nation has its own structure, history & aspirations. Hence, singular institutions. BNDES is a singular institution. But, some features of its “DNA” may serve as “food for thought”:
Flexibility: learning and adaptation to change
The spirit of serving the public interest
Competence to be effective and efficient
Team player: instrument to build for the long term
Obsession with investment, with development
Political leadership – at the institution, in the country

14. Financing Development: the case of BNDES
May 2012
João Carlos Ferraz
Vice President