The Liquidity Dilemma in the Amazon: FNO, Prudential Regulation, and the Challenge of the Green Transition
By Álvaro Marcelino Nunes (PPGE/UFPA) Reconciling the expansion of productive activities with environmental conservation is the greatest macroeconomic challenge facing the contemporary Amazon. In Brazil’s Northern region, the main public instrument for mitigating regional disparities is the Constitutional Financing Fund of the North (Fundo Constitucional de Financiamento do Norte – FNO), established by the 1988 Federal Constitution and regulated by Law No. 7,827/1989. Under the guidelines of the Ministry of Integration and Regional Development (MIDR) and Sudam, the Fund’s exclusive financial operating agent is Banco da Amazônia S.A. (Basa). However, the implementation of the FNO reveals a chronic structural misalignment: the disconnection between the logic of credit allocation guided by the national monetary authority and the urgent needs of the forest’s ecological transition. The analysis of empirical data on the Fund’s operations (2017–2024), combined with prudential indicators and the balance sheet structure of the banking operator, demonstrates how financial regulation acts as an institutional constraint on the socio-environmental effectiveness of credit in the periphery of national capitalism. The Kaleckian Inversion, Endogenous Money, and the Structure of Basa’s Balance Sheet To understand the central role of the FNO, it is necessary to draw on post-Keynesian and Kaleckian monetary macroeconomics. Unlike the traditional neoclassical perspective, which views banks as mere intermediaries of previously accumulated savings, endogenous money theory demonstrates that bank financing precedes and determines current investment (Lavoie, 2014). Credit generates income, which subsequently becomes the savings necessary to settle the initial debt commitment (Kalecki, 1983). See Equation 1 applied to the FNO according to heterodox economic guidelines. (1) The equation demonstrates that aggregate income (Y) is generated endogenously from economic expenditures, where productive investment (ϕ) and capitalist consumption (Cₖ) are multiplied by the inverse of the propensity to save (sₚ). Consistent with the heterodox approach, investment does not depend on prior savings but is directly driven by the initial credit provided by the FNO (F₍FNO₎) and constrained by financing costs and risks (ρ), formalizing the idea that credit expansion precedes and determines income creation in the region. Schumpeter (1997) defined the banker as the “epifor” of development: by exercising discretion over which projects and sectors receive liquidity, financial authorities shape the trajectory of a society’s technological modernization. In the Amazon, where private capital markets are underdeveloped and the maturation periods of the socio-biodiversity economy are long, state-led credit inducement is indispensable. The scale and relevance of this mechanism are clearly reflected in Basa’s consolidated balance sheet in September 2024. The bank reported total assets of R$52.6 billion, supported by R$14.1 billion in funding sources and R$6.8 billion in shareholders’ equity. The operational core of this structure is its Classified Credit Portfolio of R$30.1 billion, which represents more than 57% of the bank’s total assets. This accounting magnitude reinforces the Kaleckian theoretical argument: regional economic dynamics are deeply dependent on Basa’s ability to inject liquidity into the system, as total contracted FNO disbursements increased from R$2.90 billion in 2017 to a record R$13.50 billion in 2024. The Prudential Constraint: Basel, Fixed Assets, and Liquidity Preference The core of the problem lies in the fact that the financial operator is strictly subordinated to the hierarchy of the Brazilian Financial System (Sistema Financeiro Nacional – SFN), under the regulation of the National Monetary Council (Conselho Monetário Nacional – CMN) and the supervision of the Central Bank of Brazil (Banco Central do Brasil – BCB). Financial institutions operate under the constraints of Basel III, which requires a minimum Basel Ratio (own capital relative to risk-weighted assets) to prevent insolvency, as well as limits on the Fixed Asset Ratio (equity allocated to low-liquidity assets). Basa’s balance sheet data reveal significant regulatory pressure and a strategy of balance sheet protection throughout the recent period. Between March 2020 and September 2024, the bank’s Basel Ratio increased from 12.2% to 14.6% (a level comfortably above the 11% minimum required by the BCB), supported by Risk-Weighted Assets (RWA) reference equity of R$6.7 billion. During the same period, the Fixed Asset Ratio declined from 5.5% to only 3.2% (a substantial margin below the BCB’s 50% limit). Although these indicators demonstrate strong financial health and a net profit of R$319.4 million in the third quarter of 2024, they reveal, from a macroeconomic perspective, the dominance of the Keynesian liquidity preference principle. In order to maintain a protected and flexible balance sheet, with low levels of fixed assets in the face of the region’s structural risks, banking channels become highly risk-averse regarding socio-environmental projects. By requiring strong collateral and highly liquid guarantees to approve loans, banking bureaucracy penalizes agro-extractive cooperatives and standing-forest producers, whose intangible and territorial assets do not fit within Basel regulatory frameworks. The Concentration of Green Credit and Conservatism in Risk Ratings To respond to the climate agenda and ESG practices, the FNO Green Credit Lines evolved from broad sustainability programs (2017–2020) into more segmented initiatives (Amazônia Rural Verde, Empresarial Verde, and Infraestrutura Verde between 2021–2022), followed by sectoral consolidation focused on PRONAF and irrigation (2023–2024). In nominal terms, these resources increased from R$2.78 billion in 2017 to R$7.57 billion in 2024. However, the distribution of these resources reveals significant geographical inequality and a clear capture of the Fund by agricultural frontier economies. Of the R$7.57 billion allocated to Green Credit Lines in 2024, three states absorbed the largest share: Pará received R$2.52 billion, Tocantins obtained R$2.33 billion, and Rondônia received R$2.01 billion. Together, these three territories accounted for 85.4% of the North region’s green liquidity. In contrast, states with the largest areas of preserved native forest—where substantial investments would be required to consolidate the ecological transition—received only marginal shares: Amazonas obtained R$125.7 million (1.6% of the total) and Amapá received R$44.3 million (0.5%). This geographical asymmetry becomes clearer when analyzing the composition of Basa’s Credit Portfolio by Risk Level (Ratings AA to H). In order to expand credit supply as required by the federal government without deteriorating the Basel Ratio (14.6%), the bank implemented a strong migration toward lower-risk ratings: Therefore, the financial system operates under a
