Brazil’s Lula Confesses Obsession: Cutting Bank Spreads

Brazilian real Brazilian Aldemir Bendini is the new chief executive of federally owned Banco do Brasil. His mission is to boost lending in the country's financial system and lower borrowing costs. A Banco do Brasil veteran who was previously in charge of its credit card and new retail business, Bendini succeeds Antônio Francisco de Lima Neto as CEO.

"Public banks have the fundamental task of increasing credit and competition," Finance Minister Guido Mantega said at a news conference. However he denied there was political interference in the CEO decision.

Lima Neto offered his resignation to Finance minister Mantega earlier in the week. His successor is expected to take over on April 29. Under Brazilian law the president, in this case Luiz Inácio Lula da Silva, has the authority to name and remove the bank's administrators.

Since the world economic crisis began to slow Brazil's economy last year, Lula has often mentioned the need for banks to slash commercial lending rates to boost economic activity.

In February, he called for rate cuts to "fit with the new reality" of a credit crunch that had dried up loans and increased commercial interest rates across the world.

Pressure to cut rates has mounted since Brazil's unemployment rate reached 8.5% in February, with labor leaders complaining that high lending rates were causing credit-strapped companies to eliminate jobs.

Analysts are predicting Brazil's economy will contract this year, increasing the likelihood that its central bank will keep cutting its benchmark lending rate. Commercial banks must follow suit, President Lula has repeatedly insisted.

"The reduction of bank spreads at this moment is an obsession," Lula da Silva said, referring to the difference between the interest rates banks charge borrowers and pay out to savers.

Since Banco do Brasil is 66% government owned, it already offers far cheaper loans than most of Brazil's commercial banks, charging an annual rate of 28.2%, compared to 55.9% at Itaú Unibanco Banco Múltiplo S.A., the country's largest bank.

But state-run banks should do more to help get credit flowing again, Finance Minister Guido Mantega said: "In this moment of crisis, public banks have a vital role to fill."



  • Show Comments (5)

  • W. Kamen

    Ch. C.: Shut your mouth off
    Dear Ch. C.

    Switzerland IS a Tax haven. A country whose organizations provide ‘wealth management’ services under secrecy to tax evaders and corrupt politicians. Like Liechtenstein, Andorra, Luxemburgo and so on, who cannot live from other thing unless the money corrput politicians steal from people by fraud, overbudgeting, bribery and the like.

    For those reasons, shut your mouth off if you don’t want the FBI, the BR Federal Police, the Germans and the French slamming through your secrecy barriers. The Swiss bankers will do better if they cooperate with international authorities as to get dirty money from corrupt practices hosted in bank accounts they manage.

    Otherwise, the people of those nations will make sure their authorities look for such money, and I don’t think Swiss bankers – as arrogant and stubborn they may be – would be that stupid in not disclosing accounts from people like a banker condemned by trying to bribe a police officer investingating a fraud case.

    Otherwise, the imposition of economic sanctions would be very likely, and the OECD will have no influence upon that. The group who declared the black list is the G20, not the OECD.

  • João da Silva

    [quote]In my country it works like this :
    – nearly every state has a state controlled bank.
    – it is state controlled banks that give the trends on interests rates. Be they for mortgages, rates for micro and small companies.
    – Private banks are in no way obliged to follow. But if they dont they may as well loose clients over time. Yessssss ! [/quote]

    Actually Ch.c, I think we are talking in the same frequency. Here in Brasil also we had (and still have) two Federal Banks (BB & CEF) , have Private banks and [b][i]had several[/i][/b] State banks. I always found BB and some of the State banks to be excellent for small and medium sized businesses as well as for private individuals. The service in BB and CEF improved because of the competition. Yes, like Switzerland, large banks like were (ans still are) arrogant. BUT…..BUT…. since 1985, the bank in each state was filled up with political cronies and within 10 years started going bankrupt and were sold to large private banks. That was the solution given by FHCÀ‚´s government.Remember HIM, the Sorbonne trained “Ruler”.;-)

    I have a strong feeling that BB is going the same way for the reasons you already know.In fact, under Ricardo AmaralÀ‚´s articles, I have commented about it (if you recall). For me, the private banks or privatized banks in Brasil are no different from UBS and CS. My accounts are with BB and the service is still good (at least in the Southern states), though I have been noticing employee discontentment (in all levels) for the past 3 years. Fortunately, with their ATMs spread all over the small and large cities and Internet service, I do not have to deal with their employees (though they still attend me extremely well).

    As for the large private banks, I couldn’t care less. Though their “out sourced” call centers try to entice me in opening an account with them, promising me with plenty of “Credit”. Sometimes, their calls can get hilarious as well as pathetic. 😀 😉 😉

  • ch.c.

    As far as I know no other private banks followed his order.
    Well, it doesnt work like that at all.
    In my country it works like this :
    – nearly every state has a state controlled bank.
    – it is state controlled banks that give the trends on interests rates. Be they for mortgages, rates for micro and small companies.
    – Private banks are in no way obliged to follow. But if they dont they may as well loose clients over time. Yessssss !
    Example : if I Ch.c. want a mortgage, I will contact apoproximately 3 banks, UBS and or CS, plus 2 states banks with offices in
    Geneva (OUR state bank and aanother state bank from another but with offices also in Geneva.
    – Most of the times, the lowest rates will be provided by the 2 states banks, not UBS or CS. Assume my request is approved then
    the bank will also politely remind me that I would be fair if I also set up a regular salary account threre, some other type of savings I may have elswhere or just about whatever.

    AND A POSITIVE LONG TERM RELATION…STARTS ! Employees at state banks are not necessarily very dynamic, thus they have less
    stress for profits than at UBS or CS !
    And if UBS or CS dont really compete, that is just as fine because there have no legal basis to be OBLIGED to compete on rates.

    Believe it or not but most state banks in my country have BOOMING NEW businesses !
    Even myself closed one of my account at UBS, not by fears or because I needed a mortgage, but just to show my support to one of the state bank due to what I hear from my network not necessarily working in these state banks.

    UBS more than CS tends to care mostly for the wealthy to ultra wealthy, thus they arrogant with the average citizens.
    What an error !
    I hear and also know that some very wealthy people closed ALL their accounts at UBS and preferred to go to elsewhere.

    You know in Switzerland the banking tradition dates back to a few centuries and is made of…SERVICES, AVAILABILITY AND KINDNESS !
    This is how Swiss Private Bankers kept families cliets for…GENERATIONS !

    Going back to your BB, pleasssse give them a little time now they got the “apparent” Robbing Hook Obsession !
    As I stated in a previous comment, your various state owned/controlled banks must find out what they are going to do
    with the many tens of thousands of employees they have hired…BUT WERE NOT NECESSARY.
    They were hired on Robbing Hook tricks…in exchange for letting the banks charge INSANE INTERESTS RATES !

    Just think about it ?
    Why are your spread rates so much higher than in your neighbours banks ????????????????

  • João da Silva

    [quote]Funny…No commentators ![/quote]

    [quote]oao do you hide because too shameful ?????[/quote]

    Since you insist on dragging me out of my hibernation, here is a brief comment:

    1) While you were pursuing your sinful,but pleasant activities in Monoco, I have been following this news in local media.

    2) With HIS obsession to “cut” bank spreads, HIS first move was to fire the President of the state owned BB. The immediate effect was BB to see its share value drop by 10.75% in two days time. Some say it is was deliberately done to attract “new investors”, though I am not sure if the spread has come done to benefit the business houses.

    3) As far as I know no other private banks followed his order. So it leads me to believe that it was a big publicity stunt.

    4) Also another attempt to fulfill HIS obsession is to mess with the interest rates paid to the Savings Bank accounts. Anyone who has a deposit over R$100,000 will have his interest taxed (Right now, you do not pay tax on the capital gain in the savings bank account). Perhaps you could come out with half a dozen ways to sidestep this rule. 😀

    5)[quote]And this despite what I have written on the subject just a few days ago in another thread and many many more times earlier for several years !

    Yes, you have written about this subject and HE doesn’t want to listen to you not me. In the next few days, I am going to check out with BB and confirm if it has really reduced the lending rate. I doubt it. I really think that the ones who have over R$100,000 are rushing to buy the BBÀ‚´s shares and I wouldn’t be surprised if BB is in trouble in about 6 months time and “merges” or “swallowed” by another large group.Since you are “live” in the financial world, you must be in a better position to advise small Brasilian investors. Oh, lets not forget the famous “20 year cycle” which not many “youngsters” in this site are aware of. 😀 😉 😛

    As I like to point out, if well made advertisements and inspiring speeches by the “Rulers” can fill up the bellies of the people, all they need are color LCD TVs which they can easily buy in 60 installments financed by BB at a very low interest rate brought down by artificially lowering the spread!!

    Now, I am going back to my hibernation. 😥

  • ch.c.

    Funny…No commentators !
    And this despite what I have written on the subject just a few days ago in another thread and many many more times earlier for several years !

    Joao do you hide because too shameful ?????

    Lets face it, Robbing Hook was the Master of these insane banks spreads !!!!!
    Just to have the votes & illegal financial support to be elected and re-elected.
    Sure there never was a written deal. Just verbal !
    And now around in the middle of his second reign, Robbing Hook the Liar pretends these banks spreads are HIS OBSESSION.

    Hey hey !

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