The Brazilian recovery comes at a time when its most important player will not be in the arena. For fiscal reasons, the state-owned National Bank for Economic and Social Development (BNDES) is ending its subsidized-credit lines and restricting its other tools to support the business sector. With BNDES out of the picture, the state and private retail banks will be called to take over serving the long-term credit market as a substantial part of their portfolio.

For the Brazilian bank system, this will be a revolution. The system does not offer long-term credit because, for the last 40 years, short-term loans with super-high interest rates were an inexhaustible source of profits. Banks also found other profitable activity intermediating the acquisition of federal bonds, with high fees, for clients. The result has been a well-oiled machine resistant to change.

“Despite all the problems, the Brazilian bank sector is modern, efficient, well capitalized and strongly regulated by the central bank,” declares Murilo Portugal, president of the Brazilian Federation of Banks (Febraban), who nevertheless complains of the high costs of financial intermediation. “In Brazil, the banking sector has been part of the solution, not part of the problem.”

According to Roberto Troster, director of Companhia Energetica de São Paulo and former Febraban chief economist, the Brazilian banking system is “addicted to hot money” and operates as a hostage of its shareholders, who are focused on fast and profitable returns on public bond operations and short-term credit. “In order to change this model, we will need a strong political will that, perhaps, can be found in the next Brazilian administration,” he says.

For the manufacturing sector, this is a nightmare. The lack of long-term credit can make it difficult for manufacturers to recover. Nowadays, big corporations can find long-term credit abroad. But many Brazilian companies have no access to financing without the BNDES.

“As it is time to get out of this economic crisis, I hope that the banks will be prepared to assume their responsibilities to the Brazilian economy,” said Thomas Zanotto, of the Federation of Industries of the State of São Paulo.

According to Otaviano Canuto, of the World Bank board of directors, a gradual reduction of the basic interest rate may force the banks to look for new sources of profit, such as long-term loans for corporations. But now the risk is high, and the business environment is not favorable. There are at least two measures already studied by government that can make this change possible: creation of a positive list of good borrowers, which would require that banks share customers’ confidential information, and reform of the bankruptcy law.

Both measures sit forgotten in a drawer in Brasilia.