Cesar M. Rodriguez

Public Credit Programmes and Firm Performance in Brazil

Credit rationing is a common phenomenon faced by firms, one that has negative implications for long-term investments. In Brazil, public credit plays a key role in supporting firms: state-owned banks account for almost half of the outstanding credit. Public credit programmes aim at reducing credit restrictions, increasing competitiveness and job creation for small and medium enterprises. This article analyzes the effectiveness of the credit lines managed by two main public institutions in Brazil. Results show that access to public credit lines has a significant positive impact on firms’ employment growth and exports, while no effect was found on wage differential. The impact on exports is driven by the increase in volumes among exporting firms rather than the probability of becoming an exporter.