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Political Connections and Access to Brazilian Development Bank’s Loans

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  • Andre Medeiros Sztutman
  • Dante Mendes Aldrighi

Abstract

Prior studies suggest that politically connected firms manage to buy the access to subsidized loans from the Brazilian Development Bank (BNDES) by financing candidates to federal deputies in election campaigns. Nonetheless, and although firms that most donated to these candidates were indeed the same that subsequently most tapped BNDES’ subsidized credit, no anecdotal piece of information has been reported referring to deputies being accused of interfering in BNDES lending policy to benefit their donors. Proxying political connections by the 100 largest Brazilian business groups’ donations to candidates in the 2006 election for the House of Representatives, we also documented a positive correlation between these groups’ donations and the amount they borrowed from the bank. However, carrying out regression discontinuity analysis, we found no evidence that federal deputies elected by a small margin of votes had systematically affected BNDES credit allocation decisions. The discrepant empirical results may indicate the influence on the access to the bank’s loans through political connections other than direct donations to winning federal deputies.

Suggested Citation

  • Andre Medeiros Sztutman & Dante Mendes Aldrighi, 2019. "Political Connections and Access to Brazilian Development Bank’s Loans," Working Papers, Department of Economics 2019_13, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2019wpecon13
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    References listed on IDEAS

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    1. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
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    4. Arvate, Paulo Roberto & Barbosa, Klênio & Fuzitani, Eric, 2013. "Campaign donation and government contracts in Brazilian states," Textos para discussão 336, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    5. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," SciencePo Working papers Main hal-03460972, HAL.
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    More about this item

    Keywords

    Election campaign donations; development banks; subsidized credit; regression discontinuity design.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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