Declaration to Reform Brazil's National Development Bank

The following declaration, entitled "Towards a Democratic BNDES," is authored by a group of Brazilian civil society organizations and social movements, called the "Plataforma BNDES". This group is working to reform the policies of the Brazilian National Development Bank (BNDES) in order to rescue its social mandate from an increasingly destructive and non-participative development model.

BNDES finances one third of all infrastructure in Brazil and is the central financing mechanism for Brazil's ambitious $300 million Accelerated Growth Program (PAC). Among the bank's most controversial investments is its 70% financial stake in the two mega hydroelectric dams under construction in the Southwestern Amazon known as the Madeira River Complex.

Towards a Democratic BNDES

The Brazilian economy's largest financial instrument needs to affirm its social mandate in order to serve the majority of Brazilian society.

In July 2007, nearly 30 of the most representative social movements and Brazilian non-governmental organizations presented Luciano Coutinho, the economist and president of the National Economic and Social Development Bank (BNDES), with a document entitled "Plataforma BNDES." The document acknowledged the absolute centrality of BNDES to the national economy during the second half of the 20th century and demanded a thorough and urgent revision of the strategies and operational policies of the Bank.

The influence of BNDES has grown in the two years following. In 2008, when the global economic crisis exploded, the Bank became the principal instrument used to counteract the crisis, receiving R$100 billion (US$ 54 billion) through the sale of Treasury titles. The Bank's budget reached R$160 billion (US$ 87 billion) in 2009.

The objective of this civil society group, which has adopted the name of Plataforma BNDES, is to compel the Bank – the only long-term financier of economic infrastructure in Brazil – to adopt social and environmental criteria in its project analysis, approval and monitoring protocols, repair the damage caused by harmful projects, and to fund the creation of economic structures that together would constitute a new economic model for the country. The objective of such reforms would be to greatly improve the distribution of wealth and to promote social rights and justice, ecological balance, food security and food sovereignty, public education, health, sanitation, housing, and access to formal employment.

The Plataforma deems that the only way to reorient BNDES while adhering to democratic criteria would be to replace its current primary-exporter model, which has the objective of bolstering industrial production by exploiting natural resources on an unsustainable scale. Until now, BNDES has made investments without any social or environmental criteria, expending tens of billions of dollars on projects of little economic or technological importance, while exporting Brazilian raw materials to undergo value-added transformation in the more dynamic centers of the global economy. Without delving into the debate over the quality of these investments, it is necessary to cite examples of the Bank's policies, which are highly questionable in regards to their benefits to the Brazilian public.

BNDES finances the exportation of iron ore by the company Vale do Rio Doce, an activity which produces the majority of the company's profits, yet it has not exercised its power as a "golden shareholder" to demand that the company review and reconsider 17 thousands layoffs it made in 2009. BNDES also participates in the management of centralized and economically concentrated companies like Votorantin/Aracruz Celulose and Brenco – known for their aggressive social standards in the areas of paper & cellulose and ethanol production, respectively. However, the Bank places no demands on the companies to maintain fair labor relations with their employees nor environmental mitigation measures for the communities affected by monoculture farming. BNDES is financing nearly 70% of the mega-dams on the Madeira River in Rondonia State, yet it has not demanded fiscal guarantees to help justify the billions in loans extended to these two dams.

The Bank's resources need to be equally distributed, from large corporate producers to those more representative of society's base. The latter, though largely a symbolic presence on the BNDES list of beneficiaries, more efficiently distribute the power and wealth created by innumerable kinds of low cost investments, generate more democratic power relations, cause fewer environmental impacts, and use natural resources more rationally and sustainably. They already produce the majority of employment and quality foods consumed in Brazil.

The Plataforma holds that the Bank – which laid out, established and funded the import-substitution policies and industrialization of Brazil, in addition to the privatization programs in the 1990s and, more recently, the harmful "competitive insertion" program – should contribute to the formulation of an economic plan that prioritizes the immediate elementary needs of the Brazilian population, especially the segment excluded from the benefits of so-called "development."

The Plataforma has requested open dialogue with officials at the highest level of BNDES. As a first step, it requested that the Bank make information public, clear and accessible related to its billions of dollars in loans, which usually favor only a select group of companies with preferential access to the Bank's decision-making levers. This scenario would make adoption of a public information policy a key element in the democratization of the Bank and open the door to alternative policies.

However, while BNDES president Luciano Coutinho publicly asserted his commitment to transparency, the Bank has taken exceptionally timid steps in this direction, with decades of delay in comparison to similar financial institutions, making public only scant information about the funds provided to private companies while maintaining secrecy regarding the Bank's total credit balance.

This posture clashes with Constitutional principles for the use of public resources, and has no comparison with the behavior of any other bank, public or private, inside or outside of Brazil. The criteria adopted by BNDES to release its funds – which are mostly public funds originating from the National Treasury and the Workers' Support Fund (Fundo de Amparo ao Trabalhador) - continue to be endured against the common interest of society. Public debate and public disclosure are requirements of Brazilian democracy.

On other occasions we have presented various demands to the BNDES administration. Among the most recent and urgent are the following:

1. Information Policy: Much improvement is needed in the quality and quantity of information the Bank provides. It is indispensable that detailed and precise information be made available concerning: a) the potential environmental risks of Bank projects; b) project framework for each of the Bank's lines of financing; c) project approval criteria; d) risk assessment methodology; e) companies and projects that benefit from BNDES investment outside Brazil.

2. Social and Environmental Responsibility: The adoption of social and environmental safeguards in the loan analysis and approval process is an urgent matter. It is also fundamentally important to put into practice the "Protocol of Intensions for Socio-environmental Responsibilities," which was signed by the Bank and other official agencies, such as the Environmental Ministry, in August 2008. The development and execution of these criteria need to rely upon the participation of civil society representatives.

3. Redress for Social and Environmental Impacts: Equally urgent is the establishment of policies that work to repair the social and environmental damage created by projects financed by the Bank.

The identification and measurement of impacts, as well as the actions taken to effectively repair these damages, need to be the focus of discussion and negotiation with the affected communities and their representatives.

4. Rigorous Application of Social Safety Guidelines: The Bank's Social Safety Guidelines, that call for the suspension of project financing in cases of human rights violations, need to be applied in a rigorous manner. The Bank needs to become more alert in its ability to receive and respond to denouncements of human rights violations caused by the companies it finances.

5. Lending for Micro and Small Businesses: The Bank needs to review its money distribution model, in which the presence of micro and small businesses remains marginal (with approximately 10% of the disbursement in 2008 while 76% of the resources were destined to large corporations).

6. Socially and Environmentally Responsible Productive Structure and Energy Matrix: The Bank should take on a pro-active role in financing investments that diversify Brazil's Energy Matrix and its productive structure, which would have the effect of strengthening the internal market and improving income distribution. A public, national development bank needs to direct its projects toward serving the public interest.

These demands are extensive, but there remain additional reasons for an immediate reorientation of this institution. The Bank already finances Brazilian companies that sell goods and services to other Latin American countries (especially through contractors like Camargo Correa and Odebrecht) and even to African countries, where Brazilian diplomacy has opened the doors for the company Vale do Rio Doce to establish mining operations, such as it has planned in Mozambique.

These and other investments made by the Bank in favor of Brazilian companies follow the same logic: companies aggressively establish themselves with large projects spanning vast territories, and this leads to power relations that facilitate the massive exploitation of resources, which are generally exported to foreign markets where there is demand. To maximize their income, Brazilian transnational companies adopt a double standard: they neglect to follow the same social or environmental protocols that they apply on occasion in Brazil.

In fact, these norms are not consistently applied, even in Brazil. For example, many projects do not comply with Convention 169 of the International Labor Organization (ILO), which requires the prior and informed consultation of indigenous people and any other group that may be affected by the initiation of a project.

Considering the current situation and the policy reversals of the Luciano Coutinho administration, the Plataforma is working to articulate the concerns of affected communities and portray the Bank as a co-responsible party for the negative impacts of the projects it finances. In general, when a company is brought before the courts for causing social and environmental impacts, only the company and not its financial enabler is held accountable.

BNDES, subsidized by the National Treasury, directs investments and provides considerable resources to allow projects to go forward. This modus operandi means that the Bank shares responsibility for any impacts caused by its financing. As such, the Plataforma is justified in pressuring the Bank to reform its loan approval process and to monitor the projects it finances. In addition, the group is working to draw attention to the role of the Brazilian state in propagating a regressive development model dependent on exclusionary and specialized systems of production, which leads to income concentration and profoundly damages the environments in which it operates.

The presidential elections of 2010 present an enormous opportunity to publically debate these issues, which could define the course of Brazil's national development.

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