Bloomberg News

Rousseff Boosts Pressure on Brazil Banks to Cut Loan Rates

April 13, 2012

Brazilian banks must reduce the interest they charge for loans to help bring rates to international levels, Brazilian President Dilma Rousseff said.

Banks in Latin America’s largest economy raised average consumer borrowing costs to 45.4 percent in February from 45.1 percent in January, the central bank said March 27. In the U.S., personal loans averaged 9.52 percent on April 12, according to Bankrate.com.

“I’ll speak about the positive, the need to bring our interest rates, including spreads, to international levels of the cost of capital,” Rousseff said in a speech at the National Industry Confederation in Brasilia today.

The Rousseff administration has been urging banks to cut their spreads in tandem with the nation’s benchmark rate, which has dropped 275 basis points since August to 9.75 percent. To pressure private banks to help bring down spreads that averaged 28.4 percent in February, state-owned lenders Banco do Brasil SA (BBAS3) and Caixa Economica Federal said this month they will cut their rates, in Caixa’s case by as much as 88 percent.

Falling interest rates have been slow to trickle down to consumers, said Solange Srour, chief economist at BNY Mellon ARX Investimentos. Retail sales fell 0.5 percent in February, down from an increase of 3.3 percent in January, the national statistics agency said today in Rio de Janeiro.

Murilo Portugal, president of Brazil’s private bank association known as Febraban, said on April 10 that costs including high reserve requirements and taxes represent 70 percent of bank spreads. Finance Minister Guido Mantega responded by saying the nation’s banks are profitable and have ample room to cut spreads.

Brazil needs to reduce its tax burden without putting in jeopardy its public accounts, Rousseff said today.

“We need to create conditions for our country to have tax breaks that don’t put at risk the macroeconomic situation but that we know are necessary because Brazil today has tax structures that are heavy for sustainable growth,” she said.

To contact the reporter on this story: Maria Luiza Rabello in Brasilia Newsroom at mrabello@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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