Given all the concern over government intervention in Brazil’s economy recently, the following piece of news came as a pleasant surprise on Friday morning.
The Brazilian government has raised the maximum stake that foreign investors can hold in the country’s largest state-controlled bank, Banco do Brasil, to 30 per cent from 20 per cent previously. The limit was last raised from 12.5 percent in September 2009.
Earlier this week, Banco do Brasil called a relative of mine to offer her an “opportunity to change her life” – a payroll loan. This is a form of credit whose repayments are cut directly from your pay packet every month.
The only problem was, Banco do Brasil did not do its homework. This would-be borrower is a student and doesn’t earn an income. The anecdote shows the length that banks in Brazil are going to in order to continue the country’s credit-driven economic miracle.
Credit supply in Brazil has been a little puzzling recently. While private-sector banks have been much more careful, state banks have responded to government pressure to keep credit flowing.
No wonder then that government-controlled Banco do Brasil is turning to the international debt markets for help.
Another day, another Brazilian company outlining plans for an initial public offering.
On Wednesday, Banco Do Brasil, Latin America’s largest bank by assets, said it was seeking to raise as much as R$12.15bn ($6bn) from the spinoff of its insurance and pension unit, BB Seguridade.
But talk is cheap. Given the lacklustre IPO market in Brazil at the moment — the Bovespa index is down nearly 12 per cent since the start of the year — can Banco Do Brasil pull off what would be the world’s biggest IPO so far this year?
On the homepage of Banco do Brasil, Brazil’s largest bank, you can take out a loan to buy a car, renovate your house or buy electronics and home appliances. Indeed, never before in Brazil has it been so easy to borrow money from a bank. Record-low interest rates are expected to make things even more attractive for borrowers.
Tipping things even further in favour of borrowers is a push by President Dilma Rousseff to encourage banks, all of them but especially those controlled by the government like Banco do Brasil, to reduce borrowing costs to further fuel lending and get the economy moving.
If you’re ever in any doubt about which countries Brazilian companies are looking to for expansion, just follow the money, or rather the banks.
After buying a US lender last year to cater for the growing number of Brazilians setting up home in Florida, state-controlled Banco do Brasil is now targeting the rest of Latin America and China.
It’s not the industry that normally springs to mind when you think of Brazil, but insurance is fast becoming one of the country’s investment hotspots.
Growing income among Brazil’s new middle classes and a tight labour market are boosting demand for health and auto policies. Meanwhile, the vast infrastructure projects underway to get the country ready to host the World Cup in 2014 and the Olympics two years later also offer huge opportunities for insurance companies.