www.bndes.gov.br 1

UN Group Meeting - “Rethinking the Role of National Development Banks”

Demian FioccaVice President – BNDES

December, 2 2005

BNDES: Financing the Brazilian developmentBNDES: Financing the Brazilian development

www.bndes.gov.br 2

-5,0%

-3,0%

-1,0%

1,0%

3,0%

5,0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

crisis

In the last years, economic growth was frequently interrupted by financial and Balance of Payments stress that affected aggregate demand.

GDP Growth rates GDP Growth rates % year% yearGDP Growth rates GDP Growth rates % year% year

Macroeconomic PerformanceMacroeconomic Performance

Source: IBGE

www.bndes.gov.br 3

A new development cycle

Macroeconomic PerformanceMacroeconomic Performance

From 1995 to 2001 the current account deficits didn´t foster investments.

Now, invesments grow along with domestic savings.

Source:IPEADATA

www.bndes.gov.br 4

Macroeconomic PerformanceMacroeconomic Performance

Public investment has fallen...

3,7

18,9

2,7

19,5

2,7

17,7

1,8

18,8

0

5

10

15

20

25

1970-79 1980-89 1990-99 2000-03

Public Sector Private Sector

Investiment as % of GDP

Source: Brazilian Planning Ministry

www.bndes.gov.br 5

Investments are necessaryInvestments are necessary

Yearly infrastructure growth in the selected sectors (%)

9.8 9.8

4.1 3.8

23.9

16.0

4.9

1.5-0.3 -1.6 -0.51.0

1951/1963 1964/1980 1981/1993 1994/2002

Railways

PowerGeneration

Paved Roads

… as a consequence, infrastructure investments dropped over the last 20 years

www.bndes.gov.br 6

1990 1997 2003

U.S.A. 103,3 132,5 173,6

U.K. 112,2 116,4 141,3

Germany 93,3 110,1 117,4

France 91,3 82,0 87,8

Japan 170,1 175,0 104,6

China 79,5 95,0 135,5

South Korea 81,2 113,2 119,9

India 24,0 22,8 30,5

Brazil 23,1 33,0 33,2

Chile 47,7 62,1 75,0

Mexico 17,1 21,3 18,1

Growth and Long Term FinanceGrowth and Long Term Finance

Credit/GDP ratio is

growing but it is still low

in comparison

to other economies

… credit can help infrastructure…

www.bndes.gov.br 7

Founded on June 20, 1952

100% owned by the Federal Government

Latin America’s largest development bank

Key instrument for the Federal Government

Policies

Brazil’s main provider of long-term financing

Brazilian Export Bank

Equity investor through BNDESPAR

BNDES HighlightsBNDES Highlights

www.bndes.gov.br 8

1950

1960

1970

1980

1990

Today

Infrastructure (Energy and Transport)Steel

Heavy Industry - Consumer Goods - Small and Medium-Sized EnterprisesTechnologic Development

Import SubstitutionPetrochemicals, Pulp & Paper, Steel Capital Goods

EnergyAgribusinessCompetitive Integration

Private Infrastructure and ExportsPrivatization : Management of Privatization ProgramUrban and Social Development

Industry - Infrastructure - Exports Social Inclusion – Development of Capital Markets

BNDES: A historical perspectiveBNDES: A historical perspective

www.bndes.gov.br 9

BNDES and Multilateral InstitutionsBNDES and Multilateral Institutions

Adequate return

Good asset quality indicators

US$ million

Net Assets 61,769 67,346 229,213 Net Worth 5,317 18,511 35,463 Net Income 511 1,176 (2,404) Disbursements 13,748 3,768 10,024

Capitalization 8,18% 27.49% 15,47% ROA 0.95% 1.72% -1,04% ROE 14.11% 6.60% -6.55% Non performing Loans 0,64% 0,43% 0.59%

Economic Indicators

BNDES(31/12/04)

IDB(31/12/04)

World Bank

(30/06/04)

www.bndes.gov.br 10

BNDES: FundingBNDES: Funding

FAT - Worker Assistance Fund

Permanent financing or quasi-equity

Foreign Funding

Government Agencies and Multilateral Institutions IDB, JBIC, World Bank, KfW.

Market Funding

Bonds, Loans, Structured Notes (ABS)

www.bndes.gov.br 11

Funding 2004 – Cash FlowFunding 2004 – Cash Flow

Source: BNDES Financial Area

Excellent source of funding without budgetary effects.

TreasuryAgent

5%Return on

Investment70%

Sale of Assets

9%

Others3%

FAT- WorkerAssistance Fund13%

www.bndes.gov.br 12

23,4

12,6

25,6

10,9

38,2

12,8

35,1

11,7

40,1

13,7

33,9

13,7

2000 2001 2002 2003 2004 out/ 05

Annual DisbursementsAnnual Disbursements

R$ Billion

US$ Billion

Converted to US dollar on the disbursement dates

www.bndes.gov.br 13

The BNDES responds for 19% of the total credit in the economy

19%

16%

7%

58%

Free resourcesBNDES

Other directed resources

Leasing e Public Sector

Credit Market in BrazilCredit Market in Brazil

www.bndes.gov.br 14

Source: Brazilian Central Bank

Credit Market in BrazilCredit Market in Brazil

Free Credit grew more than BNDES Financing

BNDES credit has a counter-cyclical effect

www.bndes.gov.br 15

Source: Brazilian Central Bank

Credit Market in BrazilCredit Market in Brazil

BNDES participation increases during the downturn periods of credit/GNP ratio

www.bndes.gov.br 16

BNDES credit analysis takes into consideration factors beyond the financial return of the project, seeking the promotion of economic and social development.

Spread reductions: 1,0 p.p. to less developed regions 0,5 p.p. to higher priority sectors 3,5 p.p. to MSMEs Special programs (railways, capital equipment)

Variable upside required: Equity and Quasi-equity participation

BNDES Selected GoalsBNDES Selected Goals

www.bndes.gov.br 17

%

Disbursements according to operation typeDisbursements according to operation type

62

38

52

48

39

61

46

54

47

53

59

41

54

46

45

55

46

541997

1998

1999

2000

2001

2002

2003

2004

ou

ct/

2005

Direct Operations Indirect Operations

Source: BNDES Financial Area

BNDES works in association with commercial banks

www.bndes.gov.br 18

9

91

23

77

22

78

9

91

3

97

2

98

3

97

4

96

6

94

6

94

2

98

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*

Public firms Private firms

18

Private firms absorb 98% of the BNDES disbursements

Disbursements CharacteristicsDisbursements Characteristics

www.bndes.gov.br 19

Disbursements of the BNDES Disbursements of the BNDES by Sectors of Activity by Sectors of Activity

Converted to dollar on the disbursements date

Remark: Excludes secondary market transactions

9

52%

7%

11%

30%

46%

7%

12%

35%

48%

8%

14%

30%

40%

5%

17%

38%

48%

5%

10%

37%

2001 2002 2003 2004 2005

Industry Trade and Services Farming and Forestry Infrastructure

Source: BNDES Financial Area

Focus on infrastructure and industry

www.bndes.gov.br 20

Excludes secondary market transactions

Disbursements by Firm SizeDisbursements by Firm Size

87,435

8,4247,062

Micro and Small

Medium

Large

2,624

1,310

9,793

Micro and Small

Medium

Large

Number of Operations US$ Million

Large number of operations with MSMEs

www.bndes.gov.br 21

Converted to dolar on the disbursements date

Disbursements by Firm SizeDisbursements by Firm Size

Support to MSMEs and create jobs

1,794

2,021

2,470

3,291 2,387

2001 2002 2003 2004 2005October

www.bndes.gov.br 22

Job Creation – BNDES EffectsJob Creation – BNDES Effects

Firms supported by the BNDES presented a much higher growth of formal job creation than firms not supported.

www.bndes.gov.br 23

Effect is stronger in the smaller firms

Job Creation – BNDES EffectsJob Creation – BNDES Effects

www.bndes.gov.br 24

The Brazilian Development BankThe Brazilian Development Bank

www.bndes.gov.br