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Credit for industry: in search of competitiveness
Business credit plays the important role of providing the working capital needed to operate businesses and productive investments, which over time translate into greater production of goods and services and productivity. The various productive sectors that make up the economy make use of credit. We've already covered the specifics of credit for the agricultural sector here. In this article, we will deal with the importance of credit for the industrial sector.
Industrial activity also has particular characteristics that distinguish it from other economic activities. In general, industrial activities require higher initial investments in productive resources. In addition, investments in this sector have a longer maturity, which has important implications for the average maturity of credit operations.
Historically, there have been two main sources of funding for the industrial sector:
1) the capital market: companies raise funds from various investors through assets and debt securities;
2) and the credit market: resources are offered in the form of loans and financing.
According to data from the Central Bank of Brazil, in the bank credit market, industry accounts for 38% of the total balance of funds destined for legal entities. In monetary terms, this is equivalent to a sum of R$ 855 billion. The industrial sector is second only to the Services sector, to which the National Financial System (SFN) allocates R$ 1.3 trillion - or the equivalent of 57% of the balance of corporate credit.
In addition to the expansion of production units and the renovation of the productive park, industry investments have a component whose benefits go far beyond the sector: Research and Development (R&D). Data from the National Confederation of Industry (CNI) shows that around 67% of business investment in Research and Development (R&D) comes from the industrial sector. These investments are crucial for technological innovation, the expansion of scientific knowledge and, consequently, for gains in productivity and competitiveness.
In Brazil, there are several lines of credit[AG3] for investment in research and development, aimed at companies of all sizes and the industrial sector. These lines are operated by the Brazilian Development Bank (BNDES) and regional development agencies.
Recently, the Ministry of Development, Industry, Trade and Services launched the New Industry Brazil (NIB) program, with the guidelines of the new industrial policy. One of the pillars of this program is the financing of the so-called “neo-industrialization”, through the Mais Produção Plan. The Plan involves lines of credit, non-reimbursable resources and new capital market products to boost industrial production in four areas - Innovation, Green, Exports and Productivity - mobilizing around R$ 300 billion between 2023 and 2026.
The axes are worthy, especially those relating to productivity and the environmental agenda. We must bear in mind, however, that the economic meaning of these incentives will only be realized when the positive externalities expected from these investments are generated. Hence the need to monitor and evaluate the impact of the program.
The Industry Strategy Map 2023-2033, The CNI document sets the goal of increasing the share of industrial credit in GDP to 17% by 2032, from a level of 8.0% in 2022. The document also sets the goal of increasing non-financial credit, increasing the share of debentures from 2.7% of GDP in 2022 to 5.4% in 2032.
There is indeed room for credit expansion in Brazil. The financial sustainability of this expansion requires more knowledge about credit instruments on the part of the borrower, improvements to guarantee systems and credit information and to the debt recovery process, making up what the credit bureau sector has called credit discipline. Promoting inclusion and, at the same time, credit discipline has been a banner for credit bureaus. After all, it is disciplined credit that ensures that this instrument can exercise its potential for the economy.
In recent years, there have been advances in the visibility of credit for individuals and companies, thanks to the modernization of the Positive Registry. Inclusion includes companies from all sectors, including industry. And it is more significant for small businesses, where there is a greater “gap” in access to credit. In an increasingly interconnected world, productive competitiveness is essential. In this world, disciplined credit will be an instrument for Brazilian industry to exercise its vocation, becoming increasingly innovative, competitive and inserted in global markets.
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By: Elias Sfeir President of ANBC & Member of the Climate Council of the City of São Paulo & Certified Advisor
