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Tight rules helped mitigate crisis in Brazil

From Financial Times

If Bernard Madoff had tried to run his Ponzi scheme in Brazil, it would never have got off the ground.

"There could never be a Brazilian Madoff," says Paulo Oliveira, director for new business at BM&F Bovespa, the multi-asset exchange formed last year by the merger of the São Paulo derivatives and stock exchanges. "The regulators always want to know both sides of all trades."

In many countries, regulators and exchanges require banks and brokers to reveal only the net position of their clients. If a client is long in one asset and short in another, his net position may be neutral. But he could still be a risk.

But in Brazil, brokers are obliged to provide information on every trade by every client, identified by their registered account number. Mr Madoff, who allegedly invented clients' trades and had no obligation to deliver proof, would have been stumped.>>> Go to Full Story >>>

 

Welcome Reversal: Brazil's Banks Are Strengthening Its Economy Despite the Downturn

Far from being the country of samba and Carnaval alone, Brazil has emerged in the last decade as one of a handful of countries with the greatest growth potential. Should economic forecasts prove accurate, the country’s financial sector will play a key role in making its growth highly attractive to businesses and investors alike. Even amid the worst worldwide financial crisis since the Crash of 1929, Brazil continues to distinguish itself with optimistic economic growth forecasts over the next few years. The latest IMF forecast for GDP, for example, projects 2.1% growth in 2010, versus forecasts for major industrialized countries that largely come in under 1%, and in some cases are even negative.

Now, a rash of mergers and acquisitions is redrawing Brazil’s financial map, converting the country of samba into a land of opportunity, even as financial markets outside the country shrink drastically in the face of the global downturn. This picture of growth has not escaped the attention of local and international institutions, which in recent years have begun an unprecedented process of expansion and consolidation. Those institutions that position themselves best and acquire more economic strength will benefit the most from the Brazilian boom.

One need look no further for proof that corporate deals are increasing than to the merger between Itaú (second-ranked in size) and Unibanco (ranked sixth); the purchase by Banco de Brasil (ranked number one) of Nossa Caixa (ranked tenth) and of 50% of Banco Votorantim (eighth); the acquisition of Banco Cacique by Société Générale; and, just this month, the agreement to sell Banco Pactual, the Brazilian division of Switzerland’s UBS, to BTG Investments for $2.5 billion. This deal has come at a critical time for the distressed Swiss institution, which is undergoing a liquidity crisis.

But, what’s behind all these deals? >>> Go to Full Story >>>

 

The future of human beings is what matters

By Luiz Inácio Lula da Silva, The president of Brazil — Financial Times, London

...Nobody dares to predict today what will be the future of capitalism. As the governor of a great economy described as “emerging”, what I can say is what sort of society I hope will emerge from this crisis. It will reward production and not speculation. The function of the financial sector will be to stimulate productive activity – and it will be the object of rigorous controls, both national and international, by means of serious and representative organisations. International trade will be free of the protectionism that shows dangerous signs of intensifying. The reformed multilateral organisations will operate programmes to support poor and emerging economies with the aim of reducing the imbalances that scar the world today. There will be a new and democratic system of global governance. New energy policies, reform of systems of production and of patterns of consumption will ensure the survival of a planet threatened today by global warming. But, above all, I hope for a world free of the economic dogmas that invaded the thinking of many and were presented as absolute truths. Anti-cyclical policies must not be adopted only when a crisis is under way. Applied in advance – as they have been in Brazil – they can be the guarantors of a more just and democratic society. As I said at the outset, I do not give much importance to abstract concepts. I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings. >>> Go to Full Story >>>