On the drivers of BNDES credit to Brazilian state governments

Abstract

Purpose This paper aims to address the discussion on the credit disbursement of US$28.6bn from Brazilian National Economic and Social Development Bank (BNDES) to Brazilian state governments during the period from 2009 to 2014. They try to identify the main drivers of the credit allocation in both cross state and time. Design/methodology/approach The authors use a dynamic balanced panel to estimate the role of technical and socioeconomic variables. Findings The results suggest that the states’ need for financing via BNDES exhibits neither inertial nor explosive behavior. The authors find an efficiency elasticity of this resource of 0.20. In addition, the impact of a positive change in the state fiscal status leads to an increase of 2.5 per cent in the indebtedness capacity. Finally, they find that wealthier states are more successful in demanding credit from BNDES. Practical implications This analysis of resource allocation is useful for modeling the determinants of international financial institutions as central planners. The authors also invite researchers to discuss the decision-making processes that characterize the federative pact in Brazil. Originality/value Although a burgeoning body of literature has examined the role of BNDES as a creditor institution for firms, its relationship with the public sector, in special subnational governments, has been rarely studied.