BNDES and capital markets: clarifications for the public debate in Brazil

Abstract

Since 2017, Brazil’s capital markets have experienced significant expansion. The
prevalent view attributes this trend to the downsizing of the Brazilian Development Bank
(BNDES). This paper proposes an alternative interpretation through a comprehensive analysis
of data on BNDES and capital market operations. Our findings reveal substantial differences in borrower profiles, loan terms, standards on impact assessment of tax incentives, allocation
of resources, and the procyclicality of operations. We conclude that the substitution
of the BNDES for the capital market is largely overestimated and that there are negative consequences
that are commonly overlooked.

JEL Classification: G18; G20; G21; O16.