Do public development banks hurt growth? Evidence from Brazil

Monica de Bolle – Peterson Institute for International Economics, September 2015

Brazil has been grappling with a severe political and economic
crisis. Following several years of moderate to modest growth, the
country is now deep in recession, with little or no respite in sight.
Although Brazil’s diffi culties stem from a number of entrenched
structural problems and policy missteps in recent years, they
also have been exacerbated by the growing use of public financial
institutions both to promote special interests and to serve as a countercyclical policy instrument amid a slowing economy.

Over the last few years, Brazil’s three major public banks—Caixa
Econômica Federal, Banco do Brasil, and Banco Nacional de
Desenvolvimento Econômico e Social (BNDES, Brazilian
Development Bank)—have been heavily engaged in credit expansion. This effort has been aimed at both promoting industrial policy through the advent of “national champions” and avoiding a stronger recessionary impact from the global financial crisis. Even though the national champions policy was officially halted in 2013 amid growing imbalances, public credit expansion has continued long after the subsiding of the financial crisis.

Read more…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s