São Paulo Gubernatorial Candidate Fernando Haddad Proposes State Development Bank in BNDES Model

Fernando Haddad, the gubernatorial candidate for the Workers' Party (PT) in São Paulo, announced a proposal Friday to transform the state’s development agency, Desenvolve SP, into a full-fledged development bank to fund a new wave of industrialization in Brazil's most populous and economically powerful state. Haddad, a former Finance Minister, said the new institution would operate “in the mold of the BNDES,” referring to the Brazilian National Development Bank, providing long-term, strategic credit specifically for industrial projects rather than functioning as a commercial bank or offering working capital. The plan signals a potential shift in industrial policy and capital allocation at the state level, moving resources toward strategic, large-scale manufacturing and technology initiatives.

The proposal to create a state-level financing powerhouse is intrinsically linked to the recent federal tax reform, which Haddad oversaw during his time leading the Finance Ministry. He argues that the tax reform effectively ends the so-called "fiscal war," the longstanding competition between Brazilian states to attract business by offering tax incentives. With the elimination of that competitive tool, Haddad believes São Paulo, historically the country's industrial hub, is now uniquely positioned to reassert its economic dominance by using a state development bank to steer capital into specific, long-term industrial projects and attract new businesses.

The current institution, Desenvolve SP, is already the state's financial agency, established in 2008 to support the local economy. Its primary focus has been extending credit facilities and long-term loans to micro, small, and medium-sized enterprises (MSMEs) and municipalities, often for sustainable, innovative, and counter-cyclical projects. Haddad’s plan would fundamentally change the mandate and scale of the institution, expanding its focus from general support for MSMEs and local governments to large-scale, strategic industrial financing similar to the BNDES, which manages credit lines often used to shape national infrastructure and industrial policy.

Should Haddad win the election, his move to create a powerful São Paulo development bank is likely to be watched closely by national policymakers, especially since the BNDES model is often critiqued for market distortion while its proponents credit it with supporting key national sectors. The next step for the proposal is its incorporation into the broader campaign platform, with the true test coming in a potential post-election legislative push, which would require state-level approval to legally transform the development agency into a fully authorized bank.