- Investors cheer Bastos Marques’s appointment as new BNDES CEO
- Bank’s bonds are outperforming debt from emerging-market peers
The new leader of Brazil’s development bank is bolstering confidence in the government’s efforts to revive the economy by pledging to shrink the lender’s size.
BNDES, as the bank is known, is curtailing subsidized credit for Brazil’s biggest companies to focus on financing private-public partnerships and smaller businesses that would otherwise have trouble getting loans. The effort is led by 59-year-old Maria Silvia Bastos Marques, who was appointed chief executive officer in May. She earned the moniker “Iron Lady” from local media for her straightforward manner when she ran steelmaker Cia. Siderurgica Nacional from 1999 to 2002.
Her pledges to tighten purse strings at BNDES come after her predecessor, Luciano Coutinho, oversaw a quadrupling in the bank’s credit portfolio during his nine-year tenure as the government sought to stoke economic growth. While the lending surge was a boon to companies such as meatpacker JBS SA and oil producer Petroleo Brasileiro SA, critics said it distorted credit markets and contributed to growing liabilities for a country that’s now vying to win back its investment-grade credit rating after last year’s cut to junk.
"She is making clear that the bank cannot be used as Brasilia pleases,” said Joao Augusto Frota Salles, an analyst at consultant Lopes Filho Consultoria de Investimentos SA in Rio de Janeiro, who worked with Bastos Marques at CSN in the 2000s. “It is a big shift for the bank."
Bond investors seem to support her plans. BNDES’s $1.1 billion of notes due in 2023 have gained 5.5 percent since May 16, when Bastos Marques was named CEO. That is almost three times the average for securities from emerging-market financial companies. Brazil’s real gained 0.9 percent Monday to 3.2496 per dollar as of 4:18 p.m. in New York.
Bastos Marques attracted notice as CEO of the steel company by wearing the same company-issued vests as the workers in the steelmaker’s factories, Salles said. “She liked to be seen just as a regular employee.”
She also headed Rio de Janeiro’s Olympic committee from 2011 to 2014 and served as CEO of insurance company Icatu Seguros SA.
Her promise to reduce lending at BNDES is in line with efforts by Acting President Michel Temer to restore confidence in Latin America’s largest economy. He took over the nation’s top post two months ago from Dilma Rousseff, who stepped down temporarily as she prepares to face an impeachment trial for allegedly manipulating budget figures. Brazil’s stocks, bonds and currency are all among the world’s top performers this year on optimism that Temer will reduce deficits and pull the country out of recession.
Under Coutinho, BNDES was one of the most prominent tools Rousseff and her predecessor, former President Luiz Inacio Lula da Silva, used to spur growth. Credit-rating companies cited the quick expansion in lending, funded mostly by injections from the federal government, as one of the causes for a rise in Brazil’s gross public debt and the deterioration of its fiscal accounts.
In a June 1 speech in Rio de Janeiro, Bastos Marques said BNDES will sell equity assets and consider privatizations as it seeks to attract outside investments to fund Brazil’s infrastructure projects. BNDES “certainly won’t have a brilliant year” in terms of disbursements, she added, noting that the bank will analyze when to sell some of the assets held by its investment arm, including minority equity stakes in more than 100 companies.
BNDES’s total loan portfolio increased to 695 billion reais last year from 165 billion in 2007. Most of the bank’s loans are based on the so-called TJLP subsidized rate, which is currently 6.75 percentage points below Brazil’s benchmark rate. Its credit portfolio shrank 3.6 percent in the first quarter to 670 billion reais, the bank said in its earnings report.
“We see BNDES becoming a bank with a more pro-market mentality, seeking ways to help boost private lending in Brazil,” said Bruno Carvalho, the head of fixed income at brokerage Guide Investimentos SA Corretora de Valores in Sao Paulo. “Many companies were used to relying on their cheap lending. That is changing now.”