Finance War: Brazil Wants Banks to Lend More and Charge Less

Banco Itaú Private banks in Brazil should follow state lenders and lower interest rates to help drive a rebound of the economy, said Brazilian Central Bank (BC) President, Henrique Meirelles, during a seminar last week in São Paulo. He also stated that the BC policy is geared to an accumulation of reserves "to improve the country's resistance to the crisis."

Both issues have triggered a heated debate about whether government banks are sacrificing returns by charging interest rates below the market average and if the Brazilian currency, real, was again too strong against the US dollar because of the massive influx of foreign capital.

Meirelles said he did not share the view that public banks were lowering interest rates too aggressively, "that's not our view at the moment."

The Central bank president statement comes in support of remarks by Finance Minister Guido Mantega and Banco do Brasil CEO Aldemir Bendine, who called on private banks to increase lending and lower rates.

Brazil's largest private bank Itaú Unibanco earlier in the week had criticized state banks for lending at "below-market rates". But Meirelles praised state banks for their role in keeping credit flowing during the global financial crisis and helping to stoke the economic recovery of Latin America's largest economy.

Regarding the strength of the real which has gained 26% against the US dollar so far this year, recovering almost all the ground lost when the crisis broke out last September, Meirelles said that "the Central bank has a policy of (foreign currency) reserve accumulation to improve the country's resistance to the crisis."

Although the dollar initially strengthened during the crisis because of its safe-haven status, it has since weakened considerably as investors looked to higher-risk emerging markets such as Brazil which promise better returns.

Brazil's central bank has been taking advantage of the dollar's relative weakness over the past three months to bolster its already hefty foreign reserves which have now swelled to a record 212 billion US dollars.

However this has become a main point of concern for several exporting companies. Particularly manufacturers believe Brazil could lose market share and become even more reliant on commodities exports, soy beans, iron, coffee, orange juice.

Last Friday the US dollar was equivalent to 1.85 real after having dropped to almost 2.20 at the height of the crisis earlier this year from 1.60 before September 2008.

Mercopress

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  • ch.c.

    jiveandwail
    And in 1995 the rate was 1 to 1 !
    has the Brl strengthened since then …IN YOUR VIEW ?
    And this was after 1994 when you took off 3 zeroes PLUS another 2,75 to 1 to make it 1 to 1 !
    And in the early 1980 you also took off 3 zeroes.
    And earlier another 2 times ….. 3 zeroes !

    As to the recent LOW you mentionned for the Brl, sorry but it went to 2,65 !

    Reality is that Brazil has THE SECOND WORLD WEAKEST CURRENCY AFTER ZIMBABWE….ON A SECULAR BASIS !

    Concerning Brazilian Interest Rates :
    – your rates are low when measured against your own earlier rates

    BUT…. YOUR RATES ARE STILL ONE OF THE THE HIGHEST IN SOUTH AMERICA !
    Much higher than in Chile (around 0,5 %) Colombia (around 4,5 %) and even Peru, Uruguay just to name a few countries !

    And No Doubt
    That Brazil Interests Rates are STILL THE WORLD HIGHEST …… BY FAR ……ON AN AFTER INFLATION BASIS !
    Even measured by the Central Bank Rates !
    Further increased by your Bank Lending Rates to Corporations and Individuals.
    Medium sized companies have to borrow at more than 30 %
    Individuals at about 10-12 % for mortgages, 25-30 % for cars, 40 to 100 % for personal loans, and well over 150 % for overdrafts !!!
    And this in a 4,5 % or so ….. INFLATION RATE !

    Brazilians….ENJOY YOUR FILTHY BORROWING RATES !

    Hip hip Hurrah, Hip Hip Hurrah, Hip hip Hurrah….for iNIACIO…. alias… ROBBING HOOK !
    Dont hesitate to change his mind and have him re-elected for a 3rd term.

    😉 😉 😉

  • jiveandwail

    ‘Top’ for BR$/US$ = 2.44, 3/3/09
    the ‘DÀƒ³lar comercial’ runs a few cents less, but the top was in the 2.4À‚´s in dec. À‚´08 and march À‚´09 …

    http://www.exchange-rates.org/history/BRL/usD/T

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