Public-Private Partnerships Drive Sustainable Development in Brazil's South-East

The state of Minas Gerais, just north of Rio de Janeiro and Sao Paolo, has a surface area slightly larger than France. Its geographical and socioeconomic diversity reflects that of Brazil. In recent years, the region has been working to reduce its large social disparities, prompted by simmering public anger. In 2013, millions of Brazilians took to the streets first to protest the rise of bus fares and then to demand greater investments in education, social services and health care. Since then, environmental issues have been added to the list of the region’s concerns.

It was also in 2013 that AFD signed an agreement with the Minas Gerais Development Bank (BDMG), which marked the start of pioneering cooperation between the two institutions. “BDMG was the first AFD project with a public development bank in Brazil, and AFD was the first international partner lender for BDMG,” said Lucie Astier-Such, project team and financial systems manager at AFD.

Combating greenhouse gas to adapt to climate change

In 2013, an initial 31 million euro line of credit prioritized projects focused on reducing greenhouse gas emissions in the energy, waste management and urban transportation sectors, providing benefits to ten municipalities. The aim was also to reduce the vulnerability of the regions to climate risks such as droughts and flooding.

The state's capital, Belo Horizonte, has benefited from an urban redevelopment program created to reduce flooding exposure while improving urban mobility. The Mobicentro project included the creation of bicycle paths and public transportation lanes to connect the city center with its outskirts and the development of additional stations for electric buses.

The financing also helped the city of Belo Horizonte clean up the Pampulha Lagoon, which is essential for the regional management of water resources. By monitoring the local flora and fauna, improving water quality management and educational activities for wastewater treatment, the project provided particular help in re-establishing a dynamic ecosystem in the area. Other investments allowed the region to perform maintenance work on water supply networks and treatment plants while also expanding the distribution network of the city of Juiz de Fora.

Active support of the private sector, employment and gender equality

In 2020, BDMG received a second loan of 70 million euros to support businesses in Minas Gerais and the local municipalities. This was for minimizing the socioeconomic consequences of the pandemic while allowing social and environmental projects to take off. More than 1,600 micro and small businesses were provided with support, which in turn supported 5,427 jobs.

A technical cooperation program between AFD and BMDG was also started in August of 2021 to help bring about new projects contributing to sustained economic recovery. “It's a way to identify and support projects that can then attract private investments,” said Sergio Gusmào Suchodolski, president of BDMG, president of the Brazilian Development Association (ABDE), which unites all the Brazilian national development banks, and Vice President of the Latin-American Association of Financial Institutions for Development (ALIDE). “An important part of our role,” he said, "at both BDMG and AFD is in fact to jointly mobilize public and private financial resources to assist in sustainable development. It's what we do together. ”

This technical cooperation complements BDMG’s strategy of aligning with the Sustainable Development Goals, with the added backing for the bank's Climate and Gender strategies. Female entrepreneurship was encouraged with the “Empreendedoras de Minas” and the financing of 400 woman-managed businesses.

Beyond project funding, a holistic approach

Nearly ten years after the start of the cooperation between the state of Minas Gerais and BDMG, the director of AFD in Brasilia Laëtitia Dufay, recalls just how pioneering these projects were when they began. “It was one of our first ‘climate’ funding projects,” she says. “And it brought about the contribution of a wide range of players from this state: the government, city halls, and development banks." As for France’s contribution, Laëtitia Dufay remembers the “multi-actor” approach and the participation of the Hauts-de-France region, as well as the French Agency for the Environment and Energy Management (ADEME). The president of BDMG commends its holistic approach: “It's a win-win partnership, which helps us jointly drive many more projects”.

It is thus a partnership that goes well beyond mere project funding. In April 2021, in an effort that was entirely in line with the Finance In Common Summit held during the fall of 2020, AFD stood alongside BDMG, the Global Fund for the Development of Cities (FMDV) and the IDDRI to launch the Alliance of Subnational Development Banks in Latin America and the Caribbean. “This allows us to share our knowledge, acquired experience and solutions for sustainable development in our territories. Essentially, I hope that the experience of our partnership with AFD can be useful for other partners across the globe. ”

The BDMG - AFD partnership under close evaluation

As the last AFD evaluation report shows, the support provided by Agence Française de Développement to BDMG helped to raise awareness of climate issues in the Minas Gerais local development bank.

Now positioned as a benchmark lender for sustainable development projects in the Brazilian financial sector, BDMG continues to raise awareness in municipalities and among the bank's beneficiaries.The dialog with the public authorities has also been bolstered. AFD support given to BDMG focused in fact on funding projects combating climate change, which were developed by Minas Gerais municipalities. This support is part of the continued budgetary backing provided by AFD to the climate strategy of the local state in 2012, which structured an awareness-raising initiative for environmental issues.   

AFD was the first lender to introduce sustainable development requirements in its funding offer. The setup of technical assistance helped to inform the teams about the projects’ environmental aspects through, for example, the introduction of social and environmental analytical tools. Despite the limited effects on BDMG's operational capabilities, these forms of support initiated a change in the bank's strategy, particularly with the decision to align its activities with the Sustainable Development Goals.