BNDES to Pay R$15 Billion in Dividends to Federal Government

RIO DE JANEIRO, BRAZIL – The National Bank for Economic and Social Development (BNDES) is expected to strengthen the federal government’s cash flow with approximately R$14 (US$3.5) to R$15 billion in dividends.

If carried out , this amount will be a record. Until November 2019, the state bank “fattened” the government’s coffers by R$9.5 billion – the rule approved by the board of directors determines the transfer of 60 percent of the bank’s profits.

Depending on the results of sales of shares that the bank holds in companies, including Petrobras and JBS, the dividends may even exceed R$15 billion. The bank’s profit is expected to reach R$20 billion this year.

The president of BNDES, Gustavo Montezano, is expected to announce details of the expected increase in dividends soon. The subject is being discussed with the Minister of Economy, Paulo Guedes.

The reinforcement of dividends in the Budget is being finalized by the economic team. According to a source in the area, this measure is important to accommodate new expenses, such as the extra R$6 increase in the minimum wage from February. But it will also be necessary to make room for expenses, due to the restriction of the spending ceiling (a rule that prevents spending growth above inflation).

BNDES’ dividend income in 2019 “saved” the government at a time when the Budget was blocked and the Ministries wer left in a situation of near paralysis.

There was an anticipation of dividend payments that helped the economic team at one of the most critical moments, when pressure against fiscal tightening led a wing of the government to ask for relaxation of the spending ceiling, which was prevented by the minister.

Treasury

In addition to paying dividends, the bank should also accelerate payment of its debt to the Treasury. In an interview with O Estado de São Paulo newspaper, Carlos Thadeu de Freitas, a member of the BNDES board of directors, said that BNDES can anticipate R$60 billion, more than the R$25 billion forecast for 2019.

“There is no demand. The bank is no longer competitive in the internal credit area. It is only competitive in the area of infrastructure. It has no need to have a huge portfolio. The bank lends little and has no default. It can survive today with a smaller portfolio,” he said.

According to Freitas, the bank is lending between R$50 and R$60 billion annually.

In his opinion, Minister Paulo Guedes is on the right track in accelerating returns, which allow for a reduction in public debt, an indicator that is monitored more closely by rating agencies. “In 2019, the government managed to reduce the public debt due to BNDES. The most important goal of Bolsonaro’s government was to change the debt trajectory that was unsustainable,” evaluated Freitas.