Making the Developmental State Work: How Does a Mandate Matter for the Brazilian Development Bank?

Abstract

State-owned banks are a fairly common financial alternative in most developing countries. They play important roles, but also have significant weaknesses. In the literature of the field, considerable attention has been paid to their economic performance, but there is a particular problem which deserves further consideration: the lack of public control over their actions. Based on the Brazilian experience, marked by the work of a large development bank – BNDES (Brazilian Development Bank), this article evaluates the limits and possibilities of mandates serving as accountability tools for state-owned banks. Similarly to the case of Central Banks, a mandate in this case does not refer to the positions of managers within the bank; instead, it means a public delegation of performance goals. This tool has been adopted by successful state-owned banks such as the Development Bank of Canada and the Development Bank of Southern Africa. In both cases, however, mandate is described only as a tool designed to ensure good economic performance. In this paper, in turn, mandate is discussed as an accountability tool capable of providing both information for financial choices (disclosure) and of allowing for greater developmental responsiveness for lending policy.