Luiz Ricardo Cavalcante
This chapter discusses the role played by the Brazilian Development Bank (BNDES) based upon a survey of its costs and benefits reported in the literature. It provides some theoretical background for the creation and the existence of development banks, using this background to support a brief discussion about the long-term context that marked the bank’s evolution as well as the contemporary issues concerning its role in the Brazilian economy. The author argues that a national development bank such as the BNDES contributes to increasing capital formation, as it provides credit at more favorable conditions to selected projects. However, the author also argues that the presence of the BNDES loans forces the Central Bank to raise interest rates to a level that otherwise would be lower.
In recent years Ethiopia has captured headlines for the impressive social and economic progress and for government commitment to and ownership of the development process. Domestic and external resources have been mobilized and channelled to the priority projects identified in the Growth and Transformation Plan (GTP). Despite these efforts, the gap between domestic saving and investment has been growing, requiring additional resources to finance the resource gap. Foreign resources play an important role in financing investment in Ethiopia, creating dependence on unpredictable financing, and this chapter underlines three points: (a) the strategic significance of mobilizing domestic resources to finance essential public services and investment programmes; (b) the need to explore new financing instruments to finance strategically defined investment programmes; and (c) the need to continue industrialization and diversification, and increase export earnings to resolve the foreign exchange constraint threatening to derail Ethiopia’s desire to become a middle-income country by 2025.