Long-term Financing: Exploring the Recent Advances in the Brazilian Bond Market

Aparecida, Lucas Boareto da; Lazzarini, Sergio Giovanetti; Bortoluzzo, Adriana Bruscato

doi:10.1590/1982-7849rac2022210076.en

Lucas Boareto da Aparecida

Instituto de Ensino e Pesquisa (INSPER), São Paulo, SP, Brazil.

http://orcid.org/0000-0001-7257-6947

Sergio Giovanetti Lazzarini

Instituto de Ensino e Pesquisa (INSPER), São Paulo, SP, Brazil.

http://orcid.org/0000-0001-8191-1241

Adriana Bruscato Bortoluzzo ^** Corresponding Author

Instituto de Ensino e Pesquisa (INSPER), São Paulo, SP, Brazil.

http://orcid.org/0000-0003-2872-031X

* Corresponding Author

Editors-in-chief:

Wesley Mendes-da-Silva (Fundação Getulio Vargas, EAESP, Brazil)

Marcelo de Souza Bispo (Universidade Federal da Paraíba, PPGA, Brazil)

Reviewers:

Michele Nascimento Jucá (Universidade Presbiteriana Mackenzie, CCSA, Brazil)

Hsia Hua Sheng (Fundação Getulio Vargas, EAESP, Brazil)

Peer Review Report:

The Peer Review Report is available at this external URL.

Authorship

Lucas Boareto da Aparecida

Instituto de Ensino e Pesquisa (INSPER)

R. Quatá, n. 300, Vila Olímpia, 04546-042, São Paulo, SP, Brazil

E-mail address: lucasba1@al.insper.edu.br

https://orcid.org/0000-0001-7257-6947

Sergio Giovanetti Lazzarini

Instituto de Ensino e Pesquisa (INSPER)

R. Quatá, n. 300, Vila Olímpia, 04546-042, São Paulo, SP, Brazil

E-mail address: sergiogl1@insper.edu.br

https://orcid.org/0000-0001-8191-1241

Adriana Bruscato Bortoluzzo*

Instituto de Ensino e Pesquisa (INSPER)

R. Quatá, n. 300, Vila Olímpia, 04546-042, São Paulo, SP, Brazil

E-mail address: adrianab@insper.edu.br

https://orcid.org/0000-0003-2872-031X

Conflict of Interests

The authors have stated that there is no conflict of interest.

Authors' Contributions

1^st author: conceptualization (lead); data curation (lead); formal analysis (equal); funding acquisition (equal); investigation (equal); methodology (equal); project administration (equal); resources (equal); software (equal); supervision (equal); validation (equal); visualization (equal); writing-original draft (equal); writing-review & editing (equal).

2^nd author: conceptualization (equal); data curation (equal); formal analysis (equal); funding acquisition (equal); investigation (equal); methodology (equal); project administration (equal); resources (equal); software (equal); supervision (equal); validation (equal); visualization (equal); writing-original draft (equal); writing-review & editing (equal).

3^rd author: conceptualization (supporting); data curation (supporting); formal analysis (equal); funding acquisition (equal); investigation (equal); methodology (equal); project administration (equal); resources (equal); software (equal); supervision (equal); validation (equal); visualization (equal); writing-original draft (equal); writing-review & editing (equal).

Sector	ADF test		Structural break tests		FAC test (correlogram)
Sector	No of observations	Statistics of the test	Estimated date	Statistics of the test	Statistics of the test
Financeiro	107	-10.111***	February/15	8.274*	0.020
Energia Elétrica	107	-5.821***	September/17	47.470***	28.970***
Transporte e Logística	107	-8.389***	June/17	31.833***	4.301**
Comércio Varejista	107	-9.485***	April/17	43.928***	0.658
TI e Telecomunicações	107	-9.371***	February/17	15.962***	0.881
Ass. Médica/Prod. Farm.	107	-7.762***	August/17	40.682***	8.120***
Saneamento	107	-8.701***	July/17	15.381***	2.911*
Metalurgia e Siderurgia	107	-9.017***	August/18	22.856***	1.792
Mercado Total	107	-6.431***	August/17	65.746***	20.760***

Sector	Estimated date (month/year)	No of observations	F-test	β _0i	β _1i	β _2i
$\ln (y_{i t}) = β_{0 i} + β_{1 i} \cdot \ln (y_{t - 1 i}) + β_{2 i} \cdot Q_{t i} + ε_{i t}$
Financial	February 2015	108	3.17*	1.829***	-	-1.022*
Financial	February 2015	108	3.17*	(0.425)	-	(0.574)
Electricity	September 2017	108	16.39***	3.089***	0.081	3.142***
Electricity	September 2017	108	16.39***	(0.455)	(0.098798)	(0.686)
Transport and Logistics	June 2017	108	11.67***	2.186***	-0.004	3.014***
Transport and Logistics	June 2017	108	11.67***	(0.398)	(0.097)	(0.683)
Retail trade	April 2017	108	60.19***	1.075***	-	3.933***
Retail trade	April 2017	108	60.19***	(0.280)	-	(0.507)
IT and Telecom	February 2017	108	26.53***	0.410	-	2.309***
IT and Telecom	February 2017	108	26.53***	(0.255)	-	(0.448)
Health Ins./Pharm. Man.	August 2017	108	24.30***	0.477*	-0.011	3.240***
Health Ins./Pharm. Man.	August 2017	108	24.30***	(0.243)	(0.098)	(0.556)
Sanitation	July 2017	108	15.14***	0.927***	-	1.957***
Sanitation	July 2017	108	15.14***	(0.265)	-	(0.503)
Steelmaking	August 2018	108	11.93***	0.416**	-	1.741***
Steelmaking	August 2018	108	11.93***	(0.200)	-	(0.504)
Total market	August 2017	108	19.07***	4.821***	0.276***	1.768***
Total market	August 2017	108	19.07***	(0.678)	(0.096)	(0.522)

Sector	β ₀	β _i	δ _i	γ_i (Fixed effects)
$\ln (y_{i t}) = β_{0} + β_{i} \cdot \ln (y_{t - 1 i}) + \sum_{i = 1}^{j - 1} δ_{i} \cdot Q_{t} . S_{i} + \sum_{i = 1}^{j - 1} γ_{i} \cdot S_{i} + ε_{i t}$
Constant	5.548
Constant	(0.321)***
Volume t-1		0.128
Volume t-1		(0.038)***
Financial			-0.187	0.486
Financial			(0.703)	(0.296)
Electricity			0.634***	-1.336***
Electricity			(0.124)	(0.278)
Transport and Logistics			0.208	-0.948***
Transport and Logistics			(0.171)	(0.290)
Retail trade			0.312	-1.040***
Retail trade			(0.226)	(0.325)
IT and Telecom			0.573	-1.037***
IT and Telecom			(0.366)	(0.394)
Health ins./Pharm. Manufacturing			0.534	-0.905**
Health ins./Pharm. Manufacturing			(0.423)	(0.452)
Sanitation			0.164	-1.310***
Sanitation			(0.271)	(0.337)
Observations:	672
p (F-test):	190.93***
R² (overall):	0.2276

Possible factors	Mechanism involved	Illustrative quotes from the interviews
Decrease in state participation	Loss of competitiveness of public sources (notably BNDES) due to higher relative financial costs and need for guarantees	“There was a greater migration from these longer-term opera-tions to the capital market... Previously there was a lot of BNDES participation in these debt operations... In my view, this was reduced as BNDES rates increased close to market rates, thus reducing the subsidies that the bank used to pass on. At that time, the capital market began to gain more relevance due to the terms of these operations...” (Interviewee from the steelmaking sector).
Increase in the demand for de-bentures	An excess of liquidity in the hands of investors has increased the demand for corporate bonds as an alternative capital allocation	“I understand that the liquidity excess in the hands of investors increased the demand for corporate bonds, which impacted the volume of transactions in the market.” (Interviewee from steelmaking sector).
Structure of the financial market	Bank credit limitations for long-term operations	“In relation to debentures, the company normally focuses its efforts on ICVM 476 transactions... Debentures are still the most attractive sources at this moment... A first reason is the IOF problem. As capital market transactions do not have this tax, so, they end up being more competitive in comparison with banking operations.” (Interviewee 2, from the retail trade sec-tor).
Drop in the Brazilian interest rates	Change of government and loss of competitiveness of TJLP (long-term interest rate) in relation to Selic (Brazilian federal funds rate)	“There was a change after the impeachment of President Dilma, when companies began to resort to the national capital market more often. The main reason for this is the drop in the interest rates, which made BNDES operations relatively expensive.” (Interviewee 1, from the electricity sector).
Negative impact of regulatory issues	Regulation reduces the attractiveness of transactions encouraged by issuers	“For incentivized bond issue, companies tend to have a certain fear due to the uncertainties related to the Income Tax, especial-ly for securities that use some types of receivables as backing, such as CRA and CRI... It is not clear whether the benefit is from the securitization company or the issuer of the debenture, which increases the risk of assessment by revenue.” (Interviewee 3, from the retail trade sector).
Negative impact of bureaucracy	The bureaucratic processes to register operations in the capital market end up delaying the issue of these securities, which can increase the risk of these transactions	“The main point of improvement is associated with judicial bureaucratic intricacies, such as registration in notary offices. CVM is already very active in this debenture market and has already created interesting regulations that reduce debenture issue processes. However, notary offices would be the major bottlenecks of these operations.” (Interviewee 4, from the electricity sector).

Sector	Number of issue operations	Total volume (R$ million)	Average volume (R$ million)	σ - Standard deviation (R$ million)
Financial	135	240,547	1,782	2,905
Electricity	265	87,400	330	381
Transport and Logistics	136	44,026	324	310
Retail trade	93	32,236	347	311
IT and Telecom	32	16,199	506	806
Health Ins./Pharm. Man.	30	13,653	455	397
Sanitation	56	11,679	209	170
Steelmaking	14	10,682	763	641
Total market	1.585	707,539	446	1,060

[1] * Corresponding Author

Brasil

Brasil

Long-term Financing: Exploring the Recent Advances in the Brazilian Bond Market

ABSTRACT

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