State-owned enterprises in Brazil - Aldo Musacchio and Sergio G. Lazzarini - OECD Workshop on SOEs in the Development Process

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This presentation on state-owned enterprises in Brazil was made by Aldo Musacchio and Sergio G. Lazzarini at the OECD Workshop on SOEs in the Development Process held at the OECD Conference Centre in Paris, France, on 4 April 2014.

Find out more at http://www.oecd.org/daf/ca/2014-workshop-soe-development-process.htm

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  • It is important to note that this scatter plot shows only firms that list shares or bonds in stock exchanges. NOCs that are not publicly traded are not included in this graph.
  • It is important to note that this scatter plot shows only firms that list shares or bonds in stock exchanges. NOCs that are not publicly traded are not included in this graph.
  • State-owned enterprises in Brazil - Aldo Musacchio and Sergio G. Lazzarini - OECD Workshop on SOEs in the Development Process

    1. 1. STATE-OWNED ENTERPRISES IN BRAZIL: HISTORY AND LESSONS Aldo Musacchio Harvard Business School and NBER Sergio G. Lazzarini Insper Institute of Education and Research
    2. 2. VARIETIES OF STATE CAPITALISM (Musacchio and Lazzarini, 2014) Leviathan as an entrepreneur (owner/manager)  Full state control and ownership of SOEs, with limited autonomy and transparency Leviathan as a majority investor  Publicly traded SOEs with improved autonomy and transparency  State-owned holding companies (SOHCs) Leviathan as a minority investor  Partially privatized firms (PPFs)  Minority stakes under state-owned holding companies (SOHCs)  Loans and equity from state-owned and development banks Sovereign wealth funds  Other state-controlled funds (e.g. pension funds, life insurance companies). Privately- owned firms
    3. 3. Leviathan as an entrepreneur (owner/manager)  Full state control and ownership of SOEs, with limited autonomy and transparency Leviathan as a majority investor  Publicly traded SOEs with improved autonomy and transparency  State-owned holding companies (SOHCs) Leviathan as a minority investor  Partially privatized firms (PPFs)  Minority stakes under state-owned holding companies (SOHCs)  Loans and equity from state-owned and development banks Sovereign wealth funds  Other state-controlled funds (e.g. pension funds, life insurance companies). Privately- owned firms Played a role in the initial development of Brazil; yet with different goals
    4. 4. EARLY DEVELOPMENT IN BRAZIL AND MODELS OF STATE INTERVENTION  Leviathan as an Accidental Owner (1880s-1930s).  SOEs and the Big Industrialization Push (1934-1967).  The Zenith of Leviathan as an Entrepreneur (1967-1979).  The Demise of Leviathan as an Entrepreneur and Privatization (1980s-1990s)  The Reinforcement of the Model where Leviathan is a Minority Shareholder (1990s -), especially through BNDES.
    5. 5. LEVIATHAN AS AN ACCIDENTAL OWNER (1880s- 1930s)  In the second half of the nineteenth, domestic and foreign entrepreneurs set up a nascent industrial sector.  That is, the early infrastructure projects necessary for the development of a domestic market were not undertaken by the government directly (Musacchio, 2009).  In this initial stage of state intervention, the government was an insurer against failure and a residual owner. In that role, the Brazilian government ended up owning and operating SOEs mostly by accident.  Example: shipping and railways. Lloyd Brasileiro had to be bailed out in 1913, thus falling under government control (SEST 1985-1994; Baer et al. 1973; Topik 1987).
    6. 6. SOES AND THE BIG INDUSTRIALIZATION PUSH (1934-1967)  Private stock and debt markets were in crisis and private investors were not willing to take risks (Musacchio 2009).  First wave: during and after World War II, under President Vargas. ISI with significant state ownership. – Example of companies: CSN in steel (1941); CVRD (Vale) in iron (1942); Fábrica Nacional de Motores (FNM), a manufacturer of buses, trucks and cars (1943); Companhia Hidroelétrica do São Francisco in electricity (1948); and many others.  Second wave in the 1950s. Notable cases were Petrobras (1953), and BNDE (1952). – BNDE initially focused on SOEs in energy, steel and transportation. By 1970, however, the private sector received almost 70% of the loans (Najberg, 1989 18).
    7. 7. THE ZENITH OF LEVIATHAN AS AN ENTREPRENEUR (1967-1979) Number of SOEs in Brazil according to the date when they were founded, 1857– 1986 Source: Musacchio and Lazzarini (2014)
    8. 8. THE ZENITH OF LEVIATHAN AS AN ENTREPRENEUR (1967-1979), EXPLAINED  The military government, especially after 1969, was a strong believer of state intervention and ISI.  Example: local private industrialists complained about “the lack of resources and low tariffs” to invest in the telecom sector (Díaz-Alejandro, 1984). Eventually a state-owned conglomerate, Telebras, was created (1972).  Thus, SOE expansion was not only because of lacking private capital, but also because of uncertainty regarding the profitability of private projects (given the environment of governmental intervention).  Expansion was also driven by “empire building” by autonomous SOE managers (Trebat, 1983) and decentralization of SOEs in various ministries.
    9. 9. EMPIRE BUILDING Organizational chart of the instances of control of Brazilian SOEs, c. 1979 Source: Musacchio and Lazzarini (2014) Executive Council for Economic Development Council for Social Development Ministry of Finance Banco do Brasil Acesita (Steel) Caixa Economic Federal Ministry of Industry and Commerce Cia nacional de Alcalis (ash) Siderbras (steel holding co.) CSN Acesita Cosipa Usiminas etc... Ministry of Mines and Energy Petrobras and subsidiaries Petroquisa (petrochemicals) & subsidiaries Petrobras distrib. Petrobras Fertilizers Petrobras Mining Trading subsidiaries CVRD Docenave (shipping) Rio Doce Geology and Mining Vale Fertil (Fertilizers) Valesul (Aluminum) Other subsidiaries and co-owned aluminum firms Eletrobras (electricity holding) and subsidiaries CHESF Furnas CBEE Others Ministry of Communications Telebras (telcom holding co.) Telerj Telemig Telesp Other telecom subsidiaries Ministry of Transportation Railway holding co (RFFSA) many railway firms Port companies Shipping co's Construction co's others Ministry of Aeronautics Embraer Airports (Infraero) Other ministries Subsidiaries of other ministries, including commercial banks, Agriculture research firms (Embrapa), and military companies. Ministry of Planning Secretary of Planning BNDES Other financing agencies
    10. 10. SOEs AND FIXED CAPITAL FORMATION Fixed capital formation in Brazil originated from large SOEs, government units and private firms 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1949 1959 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Large SOEs Government Private fims Source: Original data from Trebat (1083)
    11. 11. THE DEMISE OF LEVIATHAN AS AN ENTREPRENEUR -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 GDP annual change (%) % private firms with financial loss % SOEs with financial loss Source: Musacchio and Lazzarini (2014)
    12. 12. HOW SOEs and PRIVATE FIRMS RESPONDED TO THE CRISIS How Brazilian SOEs versus private firms responded to the economic crisis of 1981- 1983. Differences-in-differences adjusted with propensity score matching. Source: Musacchio and Lazzarini (2014) 7.5% -2.6% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% SOEs Private Changeinthenumberofemployeespre-and post-crisis
    13. 13. EVENTUALLY... PRIVATIZATIONS 0 5 10 15 20 25 30 35 40 45 50 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Financeiras Não-financeiras Total Usiminas CSN Embraer Light Vale, CPFL Telebrás system Banespa, BEMGE CESP, COELCE From 1990 to 2002, the government privatized 165 enterprises, obtaining total revenues of around 87 billion dollars (BNDES, 2002). Privatization revenues helped reduce public debt by an amount equivalent to 8% of GDP (Carvalho, 2001) and improved the profitability of firms (Anuatti-Neto et al., 2005).
    14. 14. Leviathan as an entrepreneur (owner/manager)  Full state control and ownership of SOEs, with limited autonomy and transparency Leviathan as a majority investor  Publicly traded SOEs with improved autonomy and transparency  State-owned holding companies (SOHCs) Leviathan as a minority investor  Partially privatized firms (PPFs)  Minority stakes under state-owned holding companies (SOHCs)  Loans and equity from state-owned and development banks Sovereign wealth funds  Other state-controlled funds (e.g. pension funds, life insurance companies). Privately- owned firms Reforms also reinforced new models of state capitalism
    15. 15. GOVERNANCE REFORMS AND THE RISE OF LEVIATHAN AS A MAJORITY INVESTOR Federal level State level Number of SOEs 47 49 Number of listed SOEs 6 16 Total assets of SOEs (US$ million) $625,356 $66,152 % of total assets held by listed SOEs 58.3% 67.8% Top listed SOEs, by assets Banco do Brasil (banking) Petrobras (oil) Eletrobras (electricity) Banco do Nordeste (banking) Banco da Amazônia (banking) Cesp (electricity) Banrisul (banking) Sabesp (water/sewage) Cemig (electricity) Copel (electricity) Source: Compiled based on data from the Securities and Exchange Commission of Brazil and the Department of Coordination and Governance of State-owned Enterprises (DEST), Ministry of Planning. Total assets include only firms with direct stakes by the government.
    16. 16. THE LEVIATHAN AS A MAJORITY INVESTOR MODEL: SOME CASES OF NATIONAL OIL COMPANIES (NOCs) Statoil (Norway) Petrobras (Brazil) Pemex (Mexico) CEOs/incentives CEO selected by Board Board (influenced by President of Brazil) President of Mexico Do CEOs usually change after presidential elections No In 3 out of 7 elections Yes CEO compensation has pay-for- performance component Yes Yes No Financials/transparency Autonomous budget Yes No, some investments need gov't approval No, some investments need gov't approval Listed? Yes Yes No Main institutional investors Norwegian national insurance fund Local pension funds, Black Rock Bondholders & Ex-Im Bank Regulation Norwegian Petroleum Directorate (NPD), reporting to the Ministry of Petroleum and Energy, de facto independent National Oil Agency (ANP), linked to the Ministry of Mines and Energy. However, influenced by the government National Carbohydrates Commission (CNH in Spanish), a decentralized agency linked to the Ministry of Energy (SENER) Source: Adapted from Pargendler, Musacchio and Lazzarini (forthcoming). Compiled from the companies’ websites and from questionnaires sent to Pemex.
    17. 17. YET, ESCALATING POLITICAL INTERFERENCE AT PETROBRAS AFTER 2012 (e.g. GASOLINE PRICES)... 50 60 70 80 90 100 110 120 130 140 01/02/12 01/17/12 02/02/12 02/17/12 03/07/12 03/22/12 04/09/12 04/24/12 05/10/12 05/25/12 06/12/12 06/27/12 07/13/12 07/30/12 08/14/12 08/29/12 09/14/12 10/01/12 10/17/12 11/01/12 11/21/12 12/06/12 12/21/12 01/11/13 01/29/13 02/15/13 03/04/13 03/19/13 04/04/13 04/19/13 05/07/13 05/22/13 06/07/13 06/24/13 07/10/13 07/25/13 08/09/13 08/26/13 09/10/13 09/25/13 10/10/13 10/25/13 11/11/13 11/28/13 12/13/13 01/03/14 01/20/14 02/04/14 PETROBRAS IBOVESPA
    18. 18. THE MINORITY INVESTOR MODEL: BNDES BNDES IDB World KDB KfW (Brazil) Bank (Korea) (Germany) Total assets (US$ bi) 330.4 87.2 428.3 123.3 591.4 Equity (US$ bi) 39.7 21 165.8 17.3 21.2 Profit (US$ bi) 6 0.3 1.7 1.4 3.5 New loans (US$ bi) 101.4 10.3 26.3 n.a. 113.1 Total outstanding loans (US$ bi) 218.1 63.0 233.6 63.6. 571.1 Size of staff 2,982 ~2,000 ~10,000 2,266 4,531 Return on equity (%) 15.1 1.4 1.0 8.1 16.5 Return on assets (%) 1.8 0.3 0.4 1.1 0.6 Profits per employee 2 ~0.2 ~0.2 0.6 0.8 Assets/equity 8.3 4.2 2.6 7.1 28 Assets (US$ mi) per employee 110.8 43.6 42.8 54.4 130.5 Source: based on Torres Filho (2009), with updated information from the banks’ annual reports.
    19. 19. OVER TIME BNDES REFOCUSED ON PRIVATE FIRMS Source: Musacchio and Lazzarini (2014)
    20. 20. BNDES AS A MINORITY SHAREHOLDER: THE CASE OF VALE (BRAZILIAN MINING FIRM) Vale’s pyramid in 2009. Percentages refer to voting shares. Funcef Petros Funcesp Previ Opportunity Cidade de Deus Part. Espírito Santo Mitsui Eletron BradesparLitelUnião Federal 18,2% 21,2%49% VALE ValeparBNDESPar 11,5% 53,9% Furthermore, the government has “golden shares” and regulates the industry (e.g. royalties)
    21. 21. BNDES AS A MINORITY SHAREHOLDER 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0 10 20 30 40 50 60 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Percentageofequity Numberoffirms Firms with director indirectstakes Firms with directstakes Average directholding as a percentage of total equity Source: Created based on data presented in Musacchio and Lazzarini (2014). Note: Indirect stakes occur when BNDESPAR buys a company that is part of a pyramidal ownership structure; that is, when it owns a company that, in turn, is a shareholder in another corporation (e.g., BNDES owns Valepar, which in turn owns Vale).
    22. 22. THE INVESTMENT ARM OF BNDES (BNDESPAR) BECAME AN IMPORTANT SOURCE OF REVENUE Source: Musacchio and Lazzarini (2014) -20 -15 -10 -5 0 5 10 15 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Billionsofreaisof2009 Loan operations Equity and other investments Exchange rate operations Inflation indexation
    23. 23. EVIDENCE ON MINORITY STAKES BY BNDES (1995-2009) ROA is the dependent variable. Minority state equity is measured as… Direct or indirect stakes (dummy) Direct stakes only (percentage) Stake > 0% Stake ≥ 10% (1) (2) (3) (4) (5) (6) Hypothesized effects Minority 0.111** 0.003 0.009** 0.004*** 0.003 0.183*** (0.055) (0.039) (0.004) (0.002) (0.047) (0.060) Minority×Group -0.131** -0.041 -0.012*** -0.007** -0.070 -0.233*** (0.061) (0.045) (0.005) (0.003) (0.057) (0.080) Controls Group 0.124** 0.101 0.116** 0.096 0.091 0.091 (0.051) (0.079) (0.050) (0.096) (0.092) (0.097) Ln(Revenues) 0.078*** 0.027** 0.079*** 0.032*** 0.030*** 0.034*** (0.025) (0.013) (0.025) (0.011) (0.011) (0.012) Leverage -0.012 -0.387*** -0.012 -0.380*** -0.388*** -0.360*** (0.008) (0.057) (0.008) (0.056) (0.055) (0.055) Fixed assets -0.280** -0.223** -0.281** -0.225** -0.200** -0.256*** (0.115) (0.090) (0.115) (0.091) (0.096) (0.091) Foreign control 0.035 -0.029 0.031 -0.038 -0.047 -0.018 (0.033) (0.027) (0.034) (0.037) (0.039) (0.041) State control 0.01 -0.019 -0.003 -0.073 -0.070 -0.080 (0.046) (0.063) (0.055) (0.078) (0.075) (0.079) Merger -0.019 -0.031 -0.007 -0.081 -0.090 -0.077 (0.045) (0.051) (0.046) (0.060) (0.064) (0.064) Year, firm, firm–industry fixed effects Yes Yes Yes Yes Yes Yes With propensity score matching No Yes No Yes Yes Yes N (total observations) 2,920 1,169 2,919 1,194 2,919 1,194 N (number of firms) 367 128 367 130 130 130 p (F-test) < 0.001 < 0.001 < 0.001 < 0.001 < 0.001 < 0.001 Source: Inoue, Musacchio and Lazzarini (2013)
    24. 24. THE POSITIVE EFFECT OF MINORITY STAKES WAS HOWEVER REDUCED AS CAPITAL MARKETS IN BRAZIL DEVELOPED...
    25. 25. BNDES AS A LENDER Source: Source: Created based on original data from the Central Bank of Brazil 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 BNDES creditoperations/GDP (%) BNDES credit/total creditto the private sector (%) Gross fixed capital formation/GDP (%)
    26. 26. “NATIONAL CHAMPIONS” Percentage of total loans in the database Company In 2004 In 2009 Petrobras (oil) 14.5 39.4 Telemar Norte Leste (telecom) 10.4 7.7 Vale do Rio Doce (mining) n.a. 8.5 Suzano (paper & energy) 3.4 2.6 Brasil Telecom n.a. 3.2 Neoenergia (electricity) 3.2 2.5 CPFL Energia (electricity) 6.8 n.a. VBC Energia (electricity) 2.7 2.0 CSN (steel) 4.2 2.3 Klabin (paper) 1.3 2.1 Aracruz (cellulose) 2.4 n.a. Cesp (electricity) 11.2 n.a. Sadia (food and agribusiness) 3.2 n.a. CPFL Geração (electricity) n.a. 2.1 Embraer (airplanes) n.a. 1.4 Source: Musacchio and Lazzarini (2014), using the database employed by Lazzarini et al. (2012).
    27. 27. DO BNDES LOANS IMPROVE PERFORMANCE AND INVESTMENT? ECONOMETRIC EVIDENCE  In general: inconclusive.  Ottaviano and Sousa (2007): some lines positively affect productivity, other lines have a negative effect.  Sousa (2010): overall null effect on productivity.  Coelho and De Negri (2010) larger effect on more productive firms.  De Negri et al. (2011) effect of loans on employment and the extent of exports, but not on productivity.  Pereira, Simões and Carvalhal (2011): subsidized loans have positively affected investment (aggregated data).  Lazzarini, Musacchio, Bandeira-de-Mello and Marcon (2012): no effect on firm-level performance or investment, except for a reduction in financial expenditures due to credit subsidies (2002-2009, publicly traded firms).
    28. 28. CONCERNS ON BNDES  Credit Misallocation – Literature on state-owned banks: misallocation problem involves funding of bad firms (e.g. Bailey et al., 2011 in China). – Here: the bank is probably transferring credit to a substantial set of firms that would not need subsidized credit in the first place.  Selection of “Champions” – Lack of clear criteria; and some evidence on the role of political connections (Lazzarini et al., 2012; Sztutman and Aldrighi, 2013). – Policy of champions apparently abandoned after 2012; with new emphasis on state-controlled firms.  Soft-budget Constraints and Bailouts – Very low index of nonperforming loans; and no systematic selection of bad firms. – Yet bailouts do occur from time to time especially through convertible bonds (e.g. JBS in 2011)  Residual Interference in the Target Firms – Especially when there is collusion of minority owners and firm-level rents. Example: Vale (BNDES + pension funds).
    29. 29. CONCLUSIONS AND LESSONS (1/2)  The model of Leviathan as an entrepreneur was ubiquitous in the early development of Brazil. Yet, some development and private capital markets were already in place before 1930 (e.g. Musacchio, 2009).  SOEs were also used to control macroeconomic distortions (such as high inflation or unemployment), which not only undermined their performance but also created uncertainty for private investment.  Thus, not clear what would have happened if the state acted in a more selective way, emphasizing projects with positive externalities and “self discovery,” leaving room for a diversified and competitive private sector to thrive.  SOEs with more autonomous governance and external orientation apparently performed better; yet, autonomy led to empire building.
    30. 30. CONCLUSIONS AND LESSONS (2/2)  Reforms and privatizations led to the emergence of the models of Leviathan as a majority investor and Leviathan as a minority investor. The former involved governance reforms in SOEs but has not completely eliminated the risk of intervention. There is need of sophisticated capital markets and independent regulatory bodies.  The model of Leviathan as a minority investor was reinforced especially through BNDES (equity and loans). When it acted as a minority shareholder, highest impact was observed in the case of standalone firms with constrained opportunity. Progressive exit is recommended as capital markets develop.  The effect of loans is rather inconclusive. Apparently there is a probably of credit misallocation involving firms that get subsidies without substantially changing investment. There should be more emphasis on small firms and projects with positive externalities (e.g. Chile’s CORFO).
    31. 31. THANK YOU! amusacchio@hbs.edu sergiogl1@insper.edu.br
    32. 32. ANCILLARY SLIDES
    33. 33. PETROBRAS: 1980 vs 2012
    34. 34. CORPORATE GOVERNANCE AND PERFORMANCE OF NOCs Governance Index: Based on whether (1) some of the equity of the NOC has been privatized ; (2) the government is a minority shareholder ; (3) there are independent board members; (4) independent board members have a simple majority on the board of directors; (5) there are no government officials holding board seats; (6) the chairman is an external board member; (7) the firm has budgetary autonomy; (8) the company’s financials are audited by a private auditing firm.
    35. 35. Fixed investment is the dependent variable. Minority state equity is measured as… Direct or indirect stakes (dummy) Direct stakes only (percentage) (1) (2) (3) (4) Hypothesized effects Constrained opportunity ×Minority 53.032 21.657 7.114*** 3.767** (48.268) (13.371) (1.697) (1.641) Constrained opportunity ×Minority×Group -52.350 -18.091 -7.113*** -3.710** (48.084) (13.544) (1.693) (1.659) Controls Minority 5.732 3.433 0.502 0.284 (3.927) (3.603) (0.402) (0.381) Minority×Group -5.906 -5.079 -0.651 -0.438 (3.889) (3.897) (0.401) (0.373) Constrained opportunity -1.968 -2.706 -2.452* -3.566* (1.457) (1.657) (1.341) (1.875) Group -0.077 -3.133 -1.014 -5.859 (1.008) (2.974) (1.008) (3.863) Constrained opportunity ×Group 1.48 0.317 1.591 0.263 (1.761) (2.372) (1.444) (2.890) Ln(Revenues) -0.768 -2.252** -1.207* -2.278** (0.698) (1.106) (0.661) (0.954) Leverage -0.002 -6.641 -0.001 -1.387 (0.031) (4.296) (0.029) (3.641) Fixed assets -4.689 2.92 -1.477 7.852 (5.837) (8.051) (3.300) (12.527) Foreign control 2.677 2.907 3.882 4.447* (2.273) (2.214) (2.487) (2.599) State control -5.127 -6.810 -0.773 -4.805 (6.091) (6.546) (1.498) (4.237) Merger 0.313 -5.968 0.116 -5.649 (1.411) (3.725) (1.453) (3.799) Year, firm, firm–industry fixed effects Yes Yes Yes Yes With propensity score matching No Yes No Yes N (total observations) 1,970 861 1,969 878 N (number of firms) 314 122 314 124 p (F test) < 0.001 < 0.001 < 0.001 < 0.001 Source: Inoue, Musacchio and Lazzarini (forthcoming)
    36. 36. IF NOT BASED ON MARKET FAILURE CONSIDERATIONS, CREDIT MISALLOCATION: STATE BANKS MAY END UP TRANSFERING SUBSIDIES TO LARGE FIRMS THAT COULD RAISE CAPITAL ELSEWHERE… ROA EBITA/assets Tobin’s q Finex/assets Capex/assets Fixed/assets Firm is observed with 0.021 0.052 -0.108 -0.148** 0.001 -0.018 with BNDES loan [0.048] [0.049] [0.241] [0.052] [0.022] [0.032] Belongs to a group -0.158 -0.151 -0.006 -0.026 -0.025 -0.020 [0.096] [0.078] [0.682] [0.082] [0.019] [0.096] Ln(Assets) 0.062 0.073 -0.204 -0.170 0.067 0.150** [0.080] [0.079] [0.467] [0.133] [0.033] [0.050] Leverage -0.256 -0.145 0.283 -0.101 -0.084 -0.249 [0.162] [0.148] [1.051] [0.259] [0.117] [0.129] Fixed -0.154 -0.041 -1.022 0.807 -0.101 [0.161] [0.177] [1.450] [0.439] [0.212] Foreign 0.148 0.138 -0.512 -0.048 -0.029 -0.037 [0.091] [0.074] [0.627] [0.047] [0.027] [0.087] Fixed effects Firm Y Y Y Y Y Y Year Y Y Y Y Y Y Industry-year Y Y Y Y Y Y N (total) 260 260 260 146 251 260 p (F test) < 0.001 < 0.001 < 0.001 < 0.001 < 0.001 < 0.001  p < 0.10 * p < 0.05 ** p < 0.01 *** p < 0.001. Robust standard errors in brackets, clustered on each firm. Regression weights come from propensity matching score (kernel) estimation on the observed variables for the initial year of the sample (2002). Fixed-effect regressions are restricted to regions of common support.
    37. 37. AN INCREASINGLY IMPORTANT SOURCE OF REVENUE FOR THE GOVERNMENT Source: Afonso e Barros (2013) 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Dividendsdividedbytotalgovernmentrevenues Sourceofdividends,percentage Petrobras and Eletrobras BNDES Other Dividends/total revenues
    38. 38. IN ADDITION, RETURNS FROM THE EQUITY BUSINESS ARE FALLING... -0.3% -2.1% -17.9% 7.4% -15.5% -12.4% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% BNDESPAR IBOVESPA Estimated variation in the market cap of BNDESPAR’s portfolio of large firms. Source:: BNDESPAR, annual reports. * 2014 data until mid March, 2014. 2012 2013 2014*
    39. 39. BNDES: PERFORMANCE IN THE LOAN BUSINESS Source: Calculated by Musacchio and Lazzarini (2014) with data from (BNDES 1953-2010). Returns are calculated as profits from BNDES’s investment portfolio (carteira de participações)—mostly through BNDESPAR—over the stock of such investments. All data was deflated using the IGP-DI index. Between 2005 and 2009, the difference between the net interest margin of loans and the SELIC rate was, on average, -7.6%, which is close to the difference between the TJLP and the SELIC in the same period (-6.7%). Thus, BNDES pays around 7.6 cents per each dollar loaned

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