No More Laughing All the Way for Banks in Brazil


No More Laughing All the Way for  Banks in Brazil

Foreign banks now own only around 20 percent of Brazilian banks
and only a handful are big players in the retail market. Foreign groups
like Deutsche Bank and the UK’s Lloyds, have shut up shop or run
their operations down to a minimum. They have sold their
Brazilian assets to local banks who are now back in charge.

by:

John Fitzpatrick

 

Three or four years ago Brazilian bankers were getting worried about the number of foreign companies entering the
country and taking over ailing banks. At one point the foreign banks controlled just under 30 percent of Brazil’s banks. The
reason why these foreigners moved in was because a large number of Brazilian banks were broke or unable to cope with the
new conditions brought about by the Real Plan, which had ended hyperinflation.

The days of hyperinflation were a misery to the masses, but a godsend to banks which made a fortune out of the big
spreads they could charge lenders. Many state-owned banks were used as treasure chests by irresponsible local politicians to
fund ambitious schemes or line their own pockets. Globalization also ended the cozy closed market, which had protected
Brazilian banks and companies for so long.

However, many of these foreigners found that buying an institution was easier than running it and started heading for
home. Foreign banks now own only around 20 percent and only a handful—HSBC, ABN AMRO and Santander—are big
players in the retail market. Others, like Spain’s BBV, Germany’s Deutsche Bank and the UK’s Lloyds, have shut up shop or
run their operations down to a minimum.

These groups have sold their Brazilian assets to local banks who are now back in charge. In some cases the
foreigners have left because of strategy decisions made at head office but the trend shows that, for the moment, Brazil is no longer
an attractive market for these banks. In the case of the Lloyd’s the departure ends a historical relationship with Brazil
which goes back 140 years.

Two American banks—Citibank and BankBoston—are well established and unlikely to leave. Many Brazilians
believe that having an account with a US bank here is a help when traveling in the US. There is also a certain snob appeal
among a certain type of Brazilian in having an account with either of them. However, even here the local banks are trying to
offer special services for the middle-class clients with some money to invest.

The three big banks—Bradesco, Itaú and Unibanco—all have separate banks to cater to the kind of client who, like
your correspondent, does anything to avoid having to enter a branch and face the prospect of a long wait under the eyes of
armed guards only to find the teller knows even less about banking than you do. Whether the Brazilian banks, who are unused
to treating clients well, can match this type of exclusive service is not so clear and we will have to wait and see.

São Paulo—a Jewel in Tiffany’s Crown

A walk through São Paulo can be an exhilarating and depressing experience. The girls are beautiful and sexy, people
are generally cheerful and the sun shines a lot. Although my neighborhood is at the crossroads of two main traffic arteries, it
is home to a large colony of green parakeets which constantly fly around, screeching and screaming, and make you realize
that you are in deepest South America.

There are many negative aspects but none worse than the social differences, which mean that a large part of the
population lives in misery. Women, surrounded by children, begging on street corners or homeless teenagers sniffing glue as they
wander the streets barefooted are among the sadder sights.

Yet amongst this deprivation there is immense wealth. In the Jardins area there are all the exclusive brand names you
would find in New York, Paris or London—Armani, Hugo Boss, Montblanc, Cartier, Versace etc. The cheapest items in these
places generally cost more than the minimum monthly wage of R$ 240 (around US$ 80). The jewelry house Tiffany has just
opened its second shop in the city following the great success of the first one, which it opened two years ago. São Paulo is the
only place in the whole of South America where it operates.

Old Centre Gets Facelift

One welcome change has been the move to redevelop the old center. I have written before about the ambivalent
delights of wandering around the old part of the city, centered on the Praça da Sé. This is the real São Paulo and much preferable
to sterile new areas like Faria Lima and Berrini, where many companies have relocated.

If you try and put aside some of the more unpleasant sights and smells you can see what a fine place it must have
been once. Stand on the steps of the cathedral and gaze across the square, surrounded by imperial palm trees, and you can
imagine yourself in the center of one of the world’s great cities.

The state and city governments have announced plans to move back to this area, a new hotel is being built and others
spruced up, buildings are being cleaned to remove layers of graffiti and attempts made to get rid of the thousands of street
traders who block the streets and pavements and act as if they owned the place.

The main problem is to end the thieving which is rife. I mentioned recently that someone tried to rob me as I crossed
the Viaduto do Chá. I therefore read with interest a comment by an official of the public security department that crime
rates are low—"pequena" was this wishful thinker’s word—and that only 375 robberies have been reported this year.

As anyone knows, most people do not even bother to report robberies and attempted robberies since they know the
thieves will never be caught. Another point raised was that murders and armed robberies are rare. Well that’s reassuring but I
doubt if it will bring back the middle classes who deserted the area years ago.

Romário—the Fallen Idol

Pelé and Ronaldo may be the "kings" of Brazilian football, but I have always had a great admiration for Romário. I
still remember the fantastic contribution he made to the team which won the 1994 World Cup. Romário was always a bit of a
bad boy and his antics on and off the field cost him a place in the squad which won the Cup last year. Like another brilliant
player, Maradona of Argentina, Romário is showing signs of getting out of control and losing all the public respect he once enjoyed.

He is now 37 and finishing his career with Fluminense of Rio de Janeiro with a bang. His latest gaffe was to attack a
dissatisfied Fluminense fan who had taunted the team during a training session. A group of supporters heckled the team, which
faces relegation from the first division because of its poor performance this season, and unleashed six chickens on the pitch to
show that the players were cowards.

Instead of ignoring them, Romário attacked one of them and beat him up. In case you think this shows that the
diminutive Romário is not a coward then you are wrong. He had an extra pair of fists and feet belonging to his burly physiotherapist
who helped him beat up the fan. The Marquess of Queensberry Rules and the Corinthian spirit do not flourish on Brazilian soil.

 

John Fitzpatrick is a Scottish journalist who first visited Brazil in 1987 and has lived in São Paulo since 1995.
He writes on politics and finance and runs his own company, Celtic Comunicações— www.celt.com.br, which specializes in editorial and translation services for Brazilian and foreign clients. You can reach him at
jf@celt.com.br


© John Fitzpatrick 2003

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