MercoPress. South Atlantic News Agency

Brazil's powerhouse bank

Environmental activists say Brazil's most powerful bank has financed development and construction projects which threaten indigenous populations in the Amazon

With his slicked-back hair, neatly trimmed, close-cropped beard, and impeccably pressed suits, Luciano Coutinho looks like any other obscure Brazilian banker.
But he is anything but an average banking man.

Coutinho is the president of the Banco Nacional de Desenvolvimento Econômico e Social - Brazil's national development bank - simply known by its Portuguese acronym, BNDES. Without question, the BNDES is the most powerful public bank in all of Latin America, and quite possibly one of the most influential - yet little known - public lending institutions in the entire world.

Think that sounds far fetched? Consider this: So far this year alone the BNDES has handed out loans and lines of credit totalling more than $57bn (100bn reais).

At the World Bank, by contrast, loans have totalled just under $47bn a year, according to the most recent data on the institution's web site.

And the pan-regional Inter-American Development Bank (IADB) lends roughly $10bn a year.

As Brazil's economy has surged in recent years - becoming the 10th largest economy in the world measured by GDP - so too has the amount of money the BNDES has loaned, more than doubling from $22bn in 2004 (based on today's currency conversion) to more than $57bn today.

Coutinho has said that the BNDES loans, coupled with credit supply, have spurred Brazil's impressive and well-publicised growth in the past few years. And bank officials have said its lending is a big reason why Brazil was one of the last countries to feel the effects of the global economic downturn, and one of the first countries to exit it.

“Under President Lula, we have been the big lever for a return to investment,” Coutinho, who rarely gives interviews, recently told the Financial Times newspaper.

Financing Latin America

The BNDES has extended multi-million dollar lines of credit to companies involved in Brazil for everything from road construction, dam building, bridge building, museum refurbishing, public transport projects, mining companies, to slaughterhouses.

And the BNDES' reach increasingly extends to all corners of Latin America; the bank's international outlays have increased 38 per cent this year alone.

According to America Economia magazine, 56 per cent of BNDES' Latin American loans outside of Brazil between 2007 and 2009 went to Argentinian firms or projects.

“I doubt the average person in Argentina realises how much their economy is being propped up by Brazil and the BNDES,” one Sao Paulo economist, who asked to remain anonymous so as not to bring attention to his clients, told Al Jazeera. “If they did know, they might start to ask some tough questions.”

Another 20 per cent of BNDES Latin America loans go to the Dominican Republic and 10 per cent to Chile and Venezuela. The BNDES also has extended loans or lines of credit to interests in Honduras, Costa Rica, Mexico, Peru, Ecuador, Paraguay, Uruguay (where the BNDES has an office), El Salvador and Cuba.

The metro in Caracas, for example, was partially built by Brazilian companies who financed the building with loans from the BNDES.

Autonomous

The BNDES, which falls under the auspices of the Ministry of Development, Industry and Foreign Trade, keeps a low public profile even within Brazil, and does not go out of the way to publicise its work. But it has wide leeway to chart its own course with almost semi-autonomy from the federal government bureaucracy. Even the BNDES headquarters are located in Rio de Janeiro, as opposed to the capital Brasilia.

Critics say maybe it is too autonomous, and contend that while the bank's power and influence has increased exponentially, the transparency, and regard for the social and environmental impacts of its loans has not. And, they contend, its cosy relationship with big business, acting as a sort of a cash dispenser for multinationals, does not benefit the majority of Brazilians.

“The private sector has gained unprecedented access to the bank's decision-making apparatus,” Christian Poirier, the Brazil programme director for Amazon Watch told Al Jazeera. “And in this way has been able to steer enormous quantities of financing toward projects that suit their bottom line, but not the public benefit.”

Emblematic of the bank's lending practises, critics contend, are projects such as the massive construction zone on the Madeira River in the Amazon, making up the Santo Antonio Dam and the Jirau Dams, both of which are still under construction. The Jirau is being made possible with the help of a $4.1bn loan from the BNDES to the builders.

Environmental danger?

According to International Rivers, an NGO that tracks environmental concerns on the world's rivers, the dam project will negatively affect the land and livelihoods of thousands of people, including indigenous tribes, who live along the banks of the river. They also say it will threaten the existence of at least 33 mammal species and permanently alter the free flow of one of the Amazon's most diverse waterways.

The project was pushed through with little or no consultation with local communities, and will heavily benefit the rich with few returns for the local communities, critics contend.

Without the loans from the BNDES, the project likely would not have had the funding to move forward, they add.

“Without BNDES financing, many projects, including the Madeira River Complex, would exist only on paper,” Poirier said. “Given the risks and impacts of mega-projects in the Amazon, as well as their enormous cost, it's very unlikely that other development banks or private banks could front sufficient funding for these projects.”

The bank has responded to criticism by pointing out that it allocated nearly $300mn to social programmes to coincide with the Jirau Dam project, and last year set up a highly publicised 'Amazon Fund' to protect the forest. And, they claim, they also have a 'social clause' built into all loans that allows it to pull funds if any laws are broken.

Critics say this clause is ineffective, insufficient, and likely would not go into effect until after a project is built, essentially making it too late for the affected communities.

“The social programmes financed by the bank to mitigate the impacts of the Jirau dam are a public relations stunt at best,” Poirier said.

Seeking stakeholder involvement

Supporters of the bank's work say it is still better for Brazil to have a rich and powerful national development bank of their own, and that the BNDES has nothing to apologise for.

On November 25, over 30 civil society groups came together in Rio de Janeiro for what is being called the first annual South American gathering of groups affected by BNDES financing. Their three-day summit was called Plataforma BNDES and they hope to make it a yearly event.

The organisers called for the BNDES to have more stakeholder involvement and a clearly articulated and implemented social and environmental safeguard policy to any loan.

But there are no signs of the BNDES slowing down.

The bank is the primary financier - to the tune of billions of dollars - in the controversial Belo Monte dam project, also in the Brazilian Amazon, which could negatively affect thousands of indigenous people, according to studies by environmental groups. Indigenous groups have voiced their outrage over the project on numerous occasions.

Football and Olympics

BNDES' influence also extends into the national pastime - football. Shortly after FIFA announced that Brazil would host the 2014 World Cup, the BNDES stepped forward and promised hundreds of millions of dollars in money to refurbish over a dozen stadiums across the country.

Behind the scenes, there is a belief by some that a key reason why Brazil was selected to host the 2014 World Cup (not to mention the 2016 Olympic Games) is because FIFA and International Olympic Committee officials were convinced the BNDES has the money to fund a good portion of the infrastructure development that might be demanded in the coming years.

Earlier this year Luiz Inacio Lula da Silva, the Brazilian president, was on hand in London to inaugurate a new BNDES office in that city, signalling the bank's growing ambitions in Europe.

And on November 18, in what could be viewed as a typical days work, the BNDES approved a $2.5bn loan for Oi group - a telecommunications company.

The loan proved that - for better or for worse - the BNDES money tap is still very much open and flowing.

By Gabriel Elizondo, Al Jazeera's correspondent in Brazil