By Brazil Stock Guide – At a conference hosted by the BNDES in Rio de Janeiro, senior executives from Brazil’s largest financial institutions said the country must accelerate the development of long-term financing tools, expand secondary market liquidity and reduce distortions that favor fixed income over equities.
José Berenguer, CEO of XP Inc. (Nasdaq: XP), argued that broadening access to investments requires deeper markets. He pointed to weak liquidity in secondary trading and the lack of fixed-income research, which discourages retail investors. “There is no way for the equity market to thrive as long as fixed income remains boosted by tax incentives,” Berenguer said.
Itaú Unibanco (B3: ITUB4; NYSE: ITUB) CEO Milton Maluhy said the transition from the subsidized TJLP rate to the TLP reshaped corporate financing by reducing BNDES’ dominance and forcing capital markets to grow. Today, capital markets account for about one-third of long-term corporate financing, compared with less than 10% a decade ago. “The challenge is to lower the cost of capital, which depends on falling interest rates, stronger institutions and a predictable legal environment,” Maluhy said.
Roberto Sallouti, CEO of BTG Pactual (B3: BPAC11), took a more upbeat view, calling Brazil “a capital markets powerhouse.” He noted issuance topped BRL 800 billion ($150 billion) in 2024, up from BRL 125 billion ten years earlier. He said fiscal credibility is key to lowering long-term rates and unlocking equity flows. “If BNDES focuses on complementing, stabilizing and innovating, Brazil will gain enormously,” Sallouti said, citing the bank’s partnership with BNDES in a $1 billion reforestation fund.
Isaac Sidney, president of Febraban, stressed that banks and capital markets must advance together. He called for fiscal discipline and a stronger securities regulator. “We need a CVM with the same reputational strength for capital markets that the Central Bank has for credit,” he said, noting that banks currently provide around BRL 7 trillion in credit to households and companies.
BNDES director Alexandre Abreu opened the session by reaffirming the state lender’s mission to act where private markets fall short. “The partnership between the state and the private sector is essential to unlock Brazil’s potential,” he said.