The BNDES national champions policy

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By PEDRO GIOVANNETTI MOURA*

The falsification of the BNDES legacy in PT governments obeys a very evident purpose on the part of the liberal narrative

Wandering through the discussions in the major newspapers that gained prominence at the beginning of the Lula 3 government is to come across two different types of fake news: there are the condemned ones – which especially deal with the coup dealings of the XNUMXth of January and the Bolsonaro family – and, with them, coexist others, the accepted ones. Accepted, repeated and, in reality, raised to a supposed truth. Aloísio Mercadante's interview with the newspaper Economic value, in early February, illustrates this “second type” of fake news, that of the mainstream media.

Giving vent to the great fear of globe group and market sectors, the questions to the president of the BNDES soon begin with a frontal questioning of the continuity or not of the policy of national champions. In a clear attempt to embarrass the interviewee – which denotes a search for the forces of capital to protect the Lula government -, the four initial questions critically confront the issue of financing Brazilian companies abroad.

Finally, the interviewers use the argument of the “lack of transparency” in bank loans granted by PT governments.[I] By implicitly returning to the theme of the “BNDES black box”, the newspaper omits the R$48 million reais thrown in the trash when being handed over to an external audit to investigate possible irregularities in the loans granted by the BNDES between 2005 and 2018. , no irregularities were found, as recognized by former President Jair Bolsonaro himself.[ii] Thus, car wash resists, with more convictions than facts.

The falsification of the BNDES legacy in the PT governments, however, obeys a quite evident purpose on the part of the newspaper and the liberal narrative: to impose a consensus and make hegemonic an idea that the bank, during the PT administrations, would have been used as a an instrument to help countries governed by the left in spite of Brazilian interests.

In this way, under a veneer of pragmatism and defense of national interests, an attempt is made to erase a fruitful debate about the experience of the policies of national champions during the PT governments, the role of the BNDES in the export of services and, ultimately, the demonization of idea of ​​using a state development bank to promote national industrial development. Embarrassment and falsification are thus used as instruments for dissolving a debate.

On the other hand, it seems to me that it is exactly from a critical balance of the last PT experience that we should guide the discussion on the role of state instruments for investment in infrastructure and internationalization of national services.

The National Champions Policy

“A national leader can be understood as a nationally owned and controlled company that is 'chosen' by the government (it receives a disproportionate share of 'intermediate assets' that allow it to become a dominant player in its 'competitive base' – the market internal market), in exchange for which it is obliged to invest intensively in its own knowledge-based assets. These assets, in turn, allow it to go global through exporting or investing abroad”.[iii]

Perhaps the starting point for understanding the policy of national champions in PT governments is, paradoxically, a denationalization of the concept, that is, placing it from a broader geographic scope. If Luciano Coutinho, Demian Fiocca and other economists were responsible for formulating an investment policy that meant releases by the BNDES to promote the internationalization of national companies in the order of U$5,86 billion, in 2005 – against U$100 million, at the beginning of 1990s – politics was not a bolt from the blue. At least since the 1990s, the discussion on state intervention to promote the internationalization of national companies has gained space, especially around the concept of Developmental Status, structured by Chalmers Johnson.

Focusing on the case of Japanese economic development – ​​at the time pointed out as an economy capable of surpassing the United States by social and economic scientists – the American affirmed that there was a very particular interaction between state bureaucracy and national private companies in the country, which gave the country a success in the internationalization of their companies.[iv] Chalmers Johnson's model was used as a basis for analyzing other cases of countries that employed public investment policies and created conditions to promote the internationalization of their companies – Canada, Germany and France are some of the most recurrently studied examples. However, in the transition from the 1990s to the 2000s, the great CASE​ of success was in the study of the economies of Southeast Asia. only the collection Routledge studies in the growing economies of Asia was responsible for the publication of 73 works that dealt with development models in the Asian continent. Some of the countries addressed, which would come close to Johnson's original concept, would be China, Taiwan, Indonesia, Singapore, Thailand and India.

Some of the Southeast Asian economies were thus considered by Alice Amsden – an important exponent of the debate on development strategies in peripheral countries – as “independent” development models. These would be able to consolidate their national production systems and boost the construction of companies and conglomerates that started to invest significantly in research and development (R&D). Latin American countries, in turn, were considered “integrationist” models, marked by the reception of foreign multinational companies without the assimilation of their technologies to national companies and various experiences of mergers and privatizations. As a result, we had Latin America not converted into a region with host countries for companies with leadership capacity in international trade.

It is within this debate on the development of peripheral economies that we place the policy of national champions that characterized the increase in funding for large national contractors – such as Odebrecht, Camargo Corrêa and Andrade Gutierrez – during the Lula governments. The choice by the big Brazilian engineering companies, therefore, consisted of a strategic objective of the PT governments to use companies with already proven international experience. Camargo Corrêa participated in the construction of the then largest hydroelectric plant in the world, Guri, in Venezuela; Odebrecht had won bids in the United States and entered the European continent; Andrade Gutierrez had become a conglomerate operating in different sectors. Thus, the government's objective was to convert these companies with a previous insertion in the world market into large players and world industry leaders.

The use of money from the BNDES to expand the operations of companies that already had their own income and, often, financing from development institutions associated with the World Bank, is explained, firstly, by the closed nature of this market for large works. Carlos Medeiros, president of the National Union of the Heavy Construction-Infrastructure Industry (Sinicon) reinforces that, currently, around 300 companies, from 15 countries, practically cartelize this market of large infrastructure works. A study by LCA Consultoria shows that, until 2004, around 80% of the large infrastructure works in Latin America were dominated by a conglomerate of American, Spanish, Italian and French companies, with Spain – an economy far from the level of industrial development of Germany and France – responsible for 1/3 of the works in the region.[v]

It is against this world backdrop that the policy to promote engineering services carried out by the first Lula and Dilma governments is understood 1. Brazilian investment, despite being comparatively small – BNDES Exim and BB Proex added disbursements of US$5,9 billion against US$35bn from Chinese EximBank; the Export Guarantee Fund (FGE) supported US$8,9bn, against US$35bn for its Spanish counterpart CESCE – produced important results. These can be measured, above all, in two economic indicators: the generation of foreign currency and jobs in the country.

Between 2003 and 2012, the net balance of engineering services more than quadrupled, going from less than US$1bn to US$4,3bn, making it one of the only service sectors to show a surplus. In the accumulated result for the period, there is a positive balance of around US$20 billion for the country. Even the much attacked BNDES loan mechanism for borrowing countries to contract Brazilian services was in surplus: until 2015, of the approximately US$10bn lent, US$12bn had been repaid. With regard to the number of jobs generated directly by the chain of engineering works, which, here, in addition to large construction companies, includes medium and small companies hired during the execution of large works, there is a jump from 402 thousand, in 2007, to 788 thousand, in 2014. The graph below summarizes the increase in the Brazilian “slice of the pie” in the Latin American works market.[vi]

Heavy engineering works carried out in Latin America by national origin of the companies. 2004 x 2012 [vii]

From a political point of view, the use of contractors has historically projected Brazil as a regional leader. Odebrecht's first international project (the Charcani hydroelectric plant in Peru) was part of the joint signing of trade agreements between the countries; such a situation would be repeated in Ecuador and Venezuela. Despite the accusations of “sub-imperialism” by the Brazilian State – a theme for another article -, the action of national contractors contributed to providing a region historically lacking in infrastructure works with basic elements when considering some level of regional integration.

In this way, a more honest assessment of the policy of national champions and national contractors seems to be an important first step towards a discussion of the role of the BNDES in the export of services in the third Lula administration.

A return to the past?

As suggested by Daedalus to his son Icarus in the famous Greek legend, when he presented him with wings: not so much to the sky and not so much to the sea.

Discussing a new policy for national contractors in 2023 begins with findings that, absolutely, do not mean completely ignoring previous experiences.

First of all, Brazil is currently experiencing a major infrastructure deficit: in 2020, our investment in infrastructure was approximately R$115 billion, or 1,55% of the national GDP, the lowest investment in recent years. Report prepared by Pezco Economics points to the need for a leap in the order of R$339 billion in public investments to combat our infrastructure bottlenecks [viii]. This investment would also lead to a greater generation of jobs: before the start of Operation Lava-Jato, Odebrecht was the largest employer in the country, even surpassing Petrobras. Thus, measures such as the payment of debts arising from leniency agreements between contractors and works, as suggested by the Minister of Civil Affairs, Rui Costa, seem to be interesting alternatives in the face of this reality.

In addition, there is the possibility of increasing Brazil's share of the world market for large works. If, in 2015, Brazil reached a world share of 3,2% of the world market for works, Turkey – a smaller and less diversified economy than Brazil – currently holds 4,4% of this market. In Latin America, after an increase in Brazilian participation, as shown in the graph above, today we have a market scenario controlled by Spanish and Chinese contractors.

This cannot mean, however, a mere quest to replicate a past model. In the first place, a new financing policy involves debating the shortcomings of past experience in light of the demands for 2023. The discussion on the criteria for granting loans to other countries by the BNDES is one of them. Always bearing in mind the overall positive balance of these loans, specific cases, such as the Venezuelan one, demand greater attention. The very history of the export of engineering services in the country can provide interesting examples in this regard: the discussion on financing the construction of the Capanda hydroelectric plant, in Angola, in the late 1980s, is one such example.

In view of the war promoted against the MPLA communists in the country, the Brazilian government at the time established a complex payment system involving Brazilian and Angolan financing agencies, in addition to Petrobras and Sonangol (Angolan oil company), known as Countertrade. A similar system was also used in Ecuador, also in the late 1980s. Evidently, an adaptation of this strategy would presuppose, among other issues, recovering the strategic nature of the state-owned company.

Another issue is the interest rate policy for small and medium-sized companies. If, on the one hand, the development of large engineering companies positively affects the sector's entire production chain, which includes other companies, this should not imply the absence of a specific policy for small companies. This is where the importance of Mercadante's declarations of changes in the Long Term Rate (TLP) to contemplate these companies comes from.

Secondly, it is necessary to visualize the changes that the major European construction companies have undergone since the second decade of the 2000s. The Spanish Dragados y Construcciones, part of the ACS group, and the Italian WeBuild, formerly Impreglio, are examples of large investments in area of ​​green and renewable energy. In addition to marketing in this area, this rearrangement of the construction profile sought, above all, to adapt to market demand in “northern” countries. Acciona, which today builds subways in São Paulo, is the same company that, in Germany, coordinates works to expand the country's renewable energy generation. It is in this context that we must understand the speech of Aloízio Mercadante, upon assuming the presidency of the BNDES, in which he states that he is “not here to debate the BNDES of the past, but to build the BNDES of the future, which will be green, inclusive, technological, digital and industrializing”. [ix] In short, what Mercadante proposes is to recognize the new dynamics of world industry.

Finally, a discussion that gains prominence in France can contribute to the Brazilian situation. In a context of an attempt to react to US subsidies in the dispute for the vanguard of the green transition, the policy of national champions undergoes a critical assessment, analyzing the need for a broader approach. As well as advocating some loosening of EU state aid laws, France is now proposing an EU-wide fund to boost strategic sectors. The French Minister of European Affairs, Laurence Boone, states that: “For too long, we have confused sectoral politics with national champions. We are moving from a company-based approach to an industry-based approach.” [X].

In this way, more than a return to the past, a new policy for the BNDES and contractors will need to be built in the Lula government 3.

Final considerations

About a decade has passed since the outbreak of Operation Lava-Jato. Recognizing the political character of dismantling a strategic sector of national industry, however, should not result in a search for a return to a previous situation. The need to combat the narratives that seek to characterize the development policies of the PT governments as failure and corruption, therefore, must serve the purpose of clearing the ground for the construction of a new debate around the issue of contractors and BNDES, in view of the new context in which we live. This is what the new Lula government will need. This is what Brazil needs.

*Pedro Giovannetti Moura is a doctoral student in history at UFRRJ.

Notes


[I]https://valor.globo.com/brasil/noticia/2023/02/06/o-brasil-precisa-de-um-eximbank-defende-mercadante.ghtml.

[ii] https://www1.folha.uol.com.br/mercado/2021/06/bolsonaro-agora-diz-que-caixa-preta-do-bndes-nunca-existiu.shtml.

[iii] AMSDEN, AH The Rise of the “Rest”: Challenges to the West from Late Industrializing Economies. São Paulo: Editora UNESP, 2009, p.336.

[iv] JOHNSON, C. Developmental State: Odyssey of a Concept. In: WOO-CUMINGS, M. The Developmental State. New York: Cornell University Press, 1999. p.32-61

[v] For a broader analysis of the meaning of these data, see: MOURA, Pedro Giovannetti. The internationalization of Construtora Norberto Odebrecht: Latin American development and integration. 2020. 185f. Dissertation (Master in Brazilian Cultures and Identities) – Institute of Brazilian Studies, University of São Paulo, São Paulo, 2020.

[vi] On this phenomenon, see: MOURA, PG Internationalization of companies in the peripheral world: a case study of Construtora Norberto Odebrecht, sketches, Florianópolis, v. 28, no. 49, p. 854-875, Sep./Dec. 2021.

[vii] LCA CONSULTORIA. Export of Engineering Services in Brazil: benefits for the Brazilian economy and support mechanisms. São Paulo, Jan.2014.

[viii] https://g1.globo.com/economia/noticia/2021/07/01/investimento-em-infraestrutura-tem-que-dobrar-para-brasil-dar-salto-de-competitividade-aponta-estudo.ghtml.

[ix] https://www.bndes.gov.br/wps/portal/site/home/imprensa/noticias/conteudo/discurso-de-posse-do-presidente-do-banco-aloizio-mercadante.

[X] https://valor.globo.com/opiniao/coluna/ue-inova-com-industrias-verdes-estrategicas.ghtml.


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