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Brazilian Economic Activity Goes Down 1.2%

Real, the Brazilian currency In Brazil, economic activity has dropped in the second quarter this year. According to the Central Bank’s Economic Activity Index (IBC-Br) seasonally adjusted considering typical cyclical variations, it went down 1.2% in the second quarter this year as against the previous quarter. Compared to the second quarter of 2013, the decrease was 1.54% based on the unadjusted data.

The IBC-Br has also had a monthly decrease going from 1.48% in June compared to May (seasonally adjusted). That was the largest decline since May 2013, when the index dropped 1.68%.

In the first half, however, the economic activity grew 0.13%, or 1.5% in the annualized index for the 12-month period ending in June. In seasonally adjusted terms, the expansion in 12 months was 1.41%.

The IBC-Br is a tool to measure the evolution of economic activity in Brazil. The index is based on information related to the level of activity in the three economic sectors – industry, trade and services, and farming.

Bank of Brazil

Banco do Brasil, the largest state-owned financial institution in the country, reported net profit of US$ 1,246 billion in the second quarter of 2014 – 62.1% down from the same period last year ($3,293 billion), and 5.6% up on the first quarter of 2014.

The shareholders’ payout amounted to US$ 484 million – 40% of the net profit.

The bank’s assets in June reached US$ 617 billion, which represents a growth of 15.4% in 12 months and a 2.3% increase against the previous quarter. This rise was mostly driven by the expansion in the credit portfolio. According to Banco do Brasil, the bank is the number one institution by assets in the whole of Latin America.

The amplified credit portfolio, which includes bonds, securities and guarantees granted, rose to US$ 316 billion in June, a growth of 12.5% in 12 months and 2.8% from the previous quarter. Property loans and credit for agribusiness also reported an increase: 84.5% and 23.7% respectively, in 12 months. During the period, Banco do Brasil took the lead in credit under the National Financial System, with a 21.3% participation rate in the market.

The total credit granted to companies closed out June at $147 billion – up 13.2% in the 12-month period, and 3.7% against the previous quarter.

Insolvency rate in operations overdue for more than 90 days answered to 1.99% of the credit portfolio. In the same period, the financial system registered 3%.

Seized Asset

Property and assets seized from criminal actions in Brazil may be kept awaiting judicial disposal for years until they depreciate completely. In an attempt to address this problem, the Organization of American States (OAS) has begun to roll out a technical consultancy project in Brazil designed to manage and appropriately dispose of property of illegal origin.

The Seized and Forfeited Asset Management Project (BIDAL in the Spanish acronym), which is already in place in a number of countries, should last for two years and may provide recommendations for change in Brazilian law.

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The aim is to improve procedures and enable performance gains for officials handling financial and asset investigations, thus increasing the efficiency of illegal asset management.

Paulo Abrão, National Justice Secretary, expects the initiative will enable authorities to better diagnose the seized asset management model to be implemented in the country. According to him, the project is a “top priority” because of the challenges involved in fighting money laundering and organized crime and protecting public property.

Ricardo Saadi, local BIDAL coordinator, admitted that Brazil faces difficulties managing seized and forfeited assets. He instanced seized cars rotting in Federal Police custody, carelessly stored works of art, and estates that remain closed for years.

The representative of the United Nations Office on Drugs and Crime (UNODC) in Brazil, Rafael Franzini, said the assets that organized crime takes from society must somehow return to it. “BIDAL plays a key role in this process. It’s a dynamic program that enables the country to make the necessary adjustments,” he explained.

Paul Simons, executive secretary of the Inter-American Drug Abuse Control Commission (CICAD) – the OAS division in charge of implementing BIDAL in Brazil – noted that the country has always been an important partner and collaborator in many areas of the organization. “This effort is the beginning of a journey that won’t be easy, but this project is critical in addressing the needs of member states,” he explained.

ABr

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