• Categories
  • Archives

Looking for the Villains in Brazil’s Banking System

“Does competition exist among Brazilian banks?” This interrogation, the title of a section of the report, “Stabilization and Reform in Latin America,” issued last week by the International Monetary Fund (IMF), places the Brazilian banking system on the witness stand.

One of the parts devoted to Brazil raises questions regarding competitiveness among Brazilian banks, high interest rates, and the dearth of loans.


The IMF study points to indications that loans by Brazilian banks amount to less than half of the country’s Gross Domestic Product (GDP), as well as their concentration of power and lack of competitiveness, as explanations for the large profits they reap from their activities as financial brokers in the country.


According to the Brazilian Federation of Banks (Febraban), both the title of the section devoted to Brazilian banks and the conclusions reached in the IMF document are sensationalist in nature, because they induce readers to believe that Brazilian banks act in the form of a cartel, even though the figures presented in the study demonstrate the opposite.


According to a declaration released by Febraban’s head economist, Roberto Luiz Troster, despite the high spread in Brazil, that is, the big difference between what it costs banks to obtain resources and the interest rates they charge for loans, “the profitability of the banking sector is low.” He affirms that “the spreads in Brazil are high, but they do not translate into profits.”


The IMF analysis also suggests that the hefty profits of Brazilian banks are basically derived from the high interest rates they charge and investments in public debt instruments.


Moreover, the report states that the number of banks in Brazil has been decreasing gradually since 1995 and, consequently, bank concentration has risen, evidence by the fact that the ten largest financial institutions account for 75% of all loans in the country.


Dércio Munhoz, professor of economics at the University of Brasí­lia (UnB), concurs with the conclusions of the report, even though he considers it very superficial.


In his view, “the Brazilian banking system is not at all competitive, due to the privatization and denationalization of the banks, which only decreased their number, without augmenting the efficiency and competitiveness of the system.”


Munhoz explains that the villains of the Brazilian banking system are “the multitudinous taxes and the high rate of compulsory reserve requirements on deposits in Brazil,” which, he says, contributes to raising the level of interest rates, as well as reducing the amount of credit available for loans.


Translation: David Silberstein
Agência Brasil

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Come January, Brazil Adds Biodiesel to Its Tanks

Brazil is getting ready to take a big leap in the direction of the ...

Brazil’s Lula Leaves Today for G8 Summit

According to professor Eiti Sato, of the University of BrasÀ­lia Department of International Relations, ...

World Meets in Brazil to Discuss Where Shopping Malls Are Going

São Paulo, Brazil, is holding a congress that will show how the shopping mall ...

New Revelations of Corruption Add Pressure on Brazil’s Senate Chief to Resign

Just-released new reports of alleged fraud and embezzlement by Brazil Senate president, José Sarney, ...

Brazil Gives US a Break Before Retaliating for Cotton Subsidies

Brazil may retaliate against the United States in case the country insists on not ...

Families of Plane Crash Victims in Brazil Accuse Government of Insensitivity

In São Paulo, relatives of the victims of Brazil's latest and deadliest air accident ...

US’s HRF Gives Brazilian Woman Human Rights Award for Fighting Death Squads

Sandra Carvalho, a lawyer, sociologist and director of the non-governmental organization Global Justice, is ...

Brazilian Shoes to Be Certified for Comfort and Safety

This week, on Thursday, January 20, during the Couromoda 2010 trade fair, the Brazilian ...

Brazil Ends Tax for Over 1000 Drugs

Brazilian President Luiz Inácio Lula da Silva signed May 19 a decree that exempts ...