A Closer Look at the Evolution of Brazil’s Overseas Investments

From 2001 to 2011, Brazil’s per capita GDP more than tripled. At the heart of this domestic economic boom is the Brazilian Development Bank (BNDES).

BNDES is Brazil’s key financial institution for domestic long-term financing, and it’s one of the main financial engines behind Brazil’s take-off as a leading Latin American economy. Its lending and equity investments are becoming increasingly important internationally.

But what’s driving all of this growth? And what standards exist to ensure that Brazil’s overseas investments aren’t coming at the expense of the environment and human well-being? WRI seeks to address these questions and more in its new slide deck, “Emerging Actors in Development Finance: A closer look at Brazil’s Growth, Influence and the Role of BNDES.”

Brazil’s Economic Boom

The development finance landscape is changing rapidly. While this type of finance has historically flowed from developed to developing nations, over the last decade, major emerging economies such as China and Brazil have fueled a growing trend of South-South development flows, increasingly channeling their overseas investments to other developing nations. For example, BNDES dominates investment flows in Andean and Southern Cone countries. It’s also making significant strategic investments in other Latin American and sub-Saharan African nations.

As we note in the slide deck, BNDES has extended its international development finance role through a variety of initiatives. A few include: the—creation of an investment arm; an export-import branch; a subsidiary in London that helps with internationalization of Brazilian companies; and management of new financial instruments such as the Amazon Fund and Brazil’s Climate Fund.

These Investments Have Social and Environmental Implications

While spurring economic growth, BNDES faces multiple challenges in ensuring that its investments are environmentally sound and socially just. For example, BNDES makes significant investments in Latin American and sub-Saharan African nations, some of which may have weak governance systems to control the impacts of investments from overseas.

Adequately addressing these challenges requires a set of guidelines to ensure that investments are made in a socially just and environmentally beneficial manner. BNDES is increasingly interested in being recognized as a responsible global investor, already putting in place initiatives like its socio-environmental policies. But it’s important that BNDES—and Brazil as a country—achieve greater commitments and safeguards.

WRI’s Emerging Actors Work in Brazil

To that end, the goal of WRI’s International Financial Flows and the Environment objective is to improve the environmental, social, and climate change policies that govern international investments. We hope to ensure that the local communities and civil society organizations impacted by investments are able to engage with investors and policy makers more effectively. WRI has recognized Brazil as an emerging actor in overseas development finance, and we’re now scaling up our efforts in the country.

Brazil took a leadership role this year in promoting a global green economy and sustainable development—especially as host of the Rio+20 conference in June. Now it’s time for governments, the private sector, civil society, and financial institutions like BNDES to work together to promote and achieve greater environmental and social safeguards for overseas investments.

This slide deck is based on preliminary research conducted by Bruce Jenkins, WRI consultant. Catarina Freitas, Alisa Zomer, Kirk Herbertson, and Roland Widmer continued this research. The data is designed to stimulate timely discussion, solicit critical feedback, and influence ongoing debate on emerging issues. We’ll continue to update the information to reflect our thinking on how to improve the sustainability of Brazil’s overseas investments.