Originally posted by jkennedy The whole whipsaw currency thing isn't great for business.   Setting up a business that relies on a "weak" currency is kind of dangerous.

Brazil has always been mainly a commodity exporter with a weak currency.

Originally posted by GreatBallsoFire Originally posted by agri2001 same here GBF I bet you`er going to love Dilma baby if she gives us 2.20-2.50 to 1 Come on now admit it. Dilma is smart. She is accepting advice from Bresser Perreira who says the Real needs to go back to 2.60-2.80 to help out industry and agri exports. Lower interest rates also give the Gov more money for health,education, infrastructure. So yes, I say good job Dilma.   She is right to go after the banks demanding lower interest rates. So her buddy at the Central Bank continues to drop the Selic rate. Wonderful! The hot money is leaving Brazil. The old ladies in Japan who bought mutual funds that bought Real debt back at 1.60 are losing their shirts/dresses. They yank the deposit, more real weakness...fine.   At 2.60-2.80 the shoe industry will jump back and so will auto part exports, farmers have more reais from sales, very much a pro-jobs approach.  She must be pro jobs as head of the Worker's Party.

Edited by Amsterdam - 10 May 2012 at 10:07

Rousserff Rate Cut Crusade Undermines Brazil’s Banks

Brazil’s President Dilma Rousseff has settled on a crowd-pleasing target as part of her campaign to lower interest rates: some of the world’s most profitable banks.

In response to growth that slowed to 2.7 percent in Latin America’s biggest economy last year, Rousseff has turned up the pressure on private lenders to force them to lower what she called “unacceptable” rates of an average 44 percent on consumer loans. She’s also altered 150-year-old rules guaranteeing savers minimum returns to pave the way for the central bank to lower its benchmark rate to a record low.

The country’s biggest lenders, such as Itau Unibanco Holding SA (ITUB4), have responded by cutting some rates. While that may mollify Rousseff, the most popular leader in the Group of 20 nations, according to polls, it won’t help bank profits that are being compressed by a rise in delinquency rates and will decline further with lower returns from government bond holdings, according to Deutsche Bank AG and Credit Suisse Group AG. (CSGN) Brazil bank stocks have lost a sixth of their dollar value since April.

“Attacking the banks works everywhere,” Albert Fishlow, an author of several books on Brazil’s economy and a former top U.S. diplomat to Latin America, said in a phone interview from New York. “People are frustrated in Brazil with the failure of the economy to pick up.”

Labor Day Offensive

The focus on the banks comes as Rousseff struggles to invigorate an economy that grew last year less than Russia, India, China and most of Latin America. Besides cutting taxes on consumer goods and boosting low-cost lending by state-run banks, policy makers have cut their key rate by 3.5 percentage points since August. The president has repeatedly called on banks to join that effort by reducing what they charge for loans.

Her rhetoric reached a high point in a nationwide televised address to commemorate international Labor Day on May 1. She said it is “unacceptable that Brazil, which has one of the most solid and profitable financial systems, continues to have the highest interest rates in the world.” The $2.1 trillion economy will only be competitive when interest rates -- the second- highest in the G-20 when adjusted for inflation -- fall to global levels, she added.

Even as the benchmark Selic approached record lows, Brazilians paid an average of 3.8 percentage points more on consumer loans in March than they did in December 2010, according to central bank data.

Unanswered Phone Call

The Sao Paulo-based banking federation, known as Febraban, says charges for loans are still high because of delinquency rates, which have risen to 7.4 percent of consumer loans in March from 5.7 percent in December 2010. Lowering borrowing costs also depends on the government reducing taxes, reserve requirements and red tape, the group says.

While the fall of the Selic helps, credit expansion will be sustainable only when both lenders and borrowers feel optimistic about the economy, Febraban’s chief economist Rubens Sardenberg said in a report on May 7. “You can lead a horse to water, but you can’t make it drink,” he wrote.

Sardenberg’s comment angered Rousseff, who refused to take a phone call from Luiz Carlos Trabuco, chief executive officer of Banco Bradesco SA (BBDC4), according to a government official familiar with the episode. Instead, she sent Finance Minister Guido Mantega to demand a public apology from Febraban, said the official, who isn’t authorized to discuss the matter publicly.

The day after Sardenberg’s report was published, the group issued a statement saying his analysis doesn’t reflect its official position or that of its members. Bradesco and Febraban declined to comment on the matter, according to officials who could not be identified because of internal policy.

185% Interest Rates

Rousseff’s demand for lower bank spreads has resonated with the public, said Fishlow, who served as deputy U.S. assistant secretary of state for Latin America under President Jimmy Carter. Brazilian consumers pay an average of 185 percent a year on overdraft loans, while companies can pay as high as 107 percent on some credit lines.

Rousseff’s approval rating stands at 64 percent, the highest ever for a Brazilian president after a year and three months in office, according to a Datafolha poll of 2,588 people taken April 18-19, which had a margin of error of two percentage points.

The rates and fees charged by Brazil’s banks, along with the returns they have traditionally earned on bonds paying the benchmark rate, have put them among the world’s most profitable. The average return on equity for the country’s top lenders, a gauge of how well a company invests shareholder capital, was about 17.9 percent last year, data compiled by Bloomberg shows. That compares with 7.4 percent in the U.S. and 2.2 percent for the biggest banks in Europe
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The banks justify their spreads because of the high delinquency rate, but they mention nothing about the guy that takes out a loan, gets sick and cannot work and finds out that the 3000 real loan he took out now has become a 12,000 real liability which of course he could not pay back.

These banks here in Brazil are not banks in the true sense of the word but are legalized loan sharks that makes the mafia drool with envy, and it`s all legal.

Btw, I think a weak currency is better for brazil in the long run, as long as it stays there.   If it starts charging back down to 1.50 again, even for 6 months, that will hurt.

High priced commodities makes it a little difficult, especially oil exports.

Originally posted by spongebob I can be completely wrong, but I doubt it, but I'm getting the feeling that Brazil isn't the hot investment anymore.

Edited by Amsterdam - 10 May 2012 at 14:30