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Brazilian Banks Struggling

Brazilian Banks StrugglingBrazilian Banks Struggling

Although large financial institutions in Brazil, such as Itau, Unibanco and Bradesco registered billion dollar profits last year, the small and medium sized banks in the country are struggling to stay afloat. These struggling institutions are now being carefully watched and have become attractive as possible acquisitions by the larger banks, especially foreign institutions.

The current economic problems faced by the country have been harder on these institutions which concentrate their credit portfolios in sectors which have been struggling to survive, have little operational flexibility and limited cash flow, NewsNow reported.

“These banks are more sensitive to risk than the bigger ones because they have high concentration percentages, either with all their credit portfolios on a specific sector or on certain types of operation,” a Moody’s credit rating agency’s senior vice president Ceres Lisboa told the press.

“We have been talking with foreign banks and there is an interest in operating in Brazil,” said Fitch director, Claudio Gallina to O Globo daily. According to Gallina the interest is coming especially from Asian institutions, which have larger capital to invest.

Yet while Asian groups are seeking information about Brazilian financial institutions, European banks have started to reduce their presence in the South American country. Barclays has announced it is closing its branches in Brazil, while HSBC sold its operations to Bradesco and is waiting for CADE (Brazil’s Anti-Trust Agency) approval to leave the country. France’s Societe Generale decided to stay in the country, but has shifted its focus to institutional and corporative clients only.

 Trade Caps

Brazil’s trade minister called for unrestricted auto trade with Mexico and Argentina recently, after data showed the automotive industry had its worst January in a dozen years.

In a brief interview with Reuters, Trade Minister Armando Monteiro said he would propose free trade in vehicles and auto parts when he travels next week to Mexico and Argentina.

That means scrapping quotas imposed in recent years when sharp currency swings heightened trade tensions between Mexico’s export-oriented auto industry and the more protectionist members of South American trading bloc Mercosur.

For Brazil, a chance to ramp up exports could bring some relief amid a crisis that has thrown one in six auto workers out of a job over the past two years, as tight credit and a deepening recession strangles domestic demand for vehicles.

Production of cars and trucks in Brazil dropped 29% in January from a year earlier, national automakers’ association Anfavea reported earlier on Thursday. It was the lowest output to start the year since 2003.

January sales fell 39% from January 2015 to the lowest monthly total in nearly nine years. Compared with December, output edged up 1.6% and sales tumbled 32%.

Financialtribune.com