What is the reason behind the European Investment Bank’s 500 million loan to the Brazilian development bank BNDES? The public money comes from the ‘climate funds’ intended for projects to stop climate change. Does this make BNDES the most logical choice? Anouk Franck of our Dutch partners organisation Both Ends went to Brazil to find out more about this loan. She wrote her findings down in a report.
Half a billion euros of development money, you can make many, many investments in clean energy with such a large sum. Both development banks have a strong financial reputation and can count on a great deal of political support from governments. Rightfully so? Does the future of development indeed lie with the private sector, as people say increasingly more often, and if so, do we want the money involved to go through this type of banks? Because I have some doubts about this, I decided to find out what this loan was going to be used for.
On the websites of both banks I found one small item about the loan, but information on which projects are to be financed with it are still not available, even though it has been over a year since the contract was signed. If I wanted to know more, I had no choice but to go to Brazil myself.
So in August 2012, I traveled to Rio de Janeiro to the head office of the BNDES. Unfortunately, BNDES didn’t want to discuss the loan with me, since the money wasn’t being spent yet. Luckily there were sufficient other sources of information. Various organisations and consultants were willing to tell me all kinds of things about the way BNDES works.
When I came back, I made my analysis: in a very short time, the bank has grown enormously; by now it is even larger than the World Bank. But while a World Bank project has to meet relatively strict environmental and social demands, the rules of BNDES are much less clear.
BNDES spends large sums of public money to support local and other businesses and offers limited information about this. The bank often invests in those very companies, sectors and projects that have a huge social or environmental impact, such as big dams in the Amazon and oil drilling near the Brazilian coast. Under the guise of “the green economy” BNDES keeps investing in fossil fuels and controversial megadams like Belo Monte in the Amazon.
Many Brazilians – interested mostly in economic growth – have full confidence in BNDES. Social and environmental organisations, however, expose abuses resulting from the extractive development model Brazil’s government encourages so enthusiastically.
Let’s not forget the EIB’s role in all of this. As a European bank, it has to follow European rules, and it has to make sure that international norms concerning participation, transparency, accountability and social and environmental criteria are met in the projects it funds. I really doubt the EIB will succeed to do so in this case.
And now the key question: can BNDES become a forerunner in the field of climate friendly investing, and is the EIB’s money not just being used to make the BNDES look green, all the while deflecting attention from its polluting activities? Is this huge amount of European climate money well spent in Brazil? I’m sad to say my doubts haven’t been removed after my ‘fact finding mission’, on the contrary.