The opportunities of privatization
Don't worry about risk and efficiency: that seems to be the lesson Brazil's banking sector can draw from its experience in recent months. The source of easy living is the government's insatiable appetite for borrowing. And in January this year that appetite became still more voracious as the country's debt - much of it denominated in dollars or dollar-linked - ballooned in local-currency terms following the devaluation of the real.
Brazil's 50 largest banks made an annualized return on equity of 43.7% in the first quarter of this year. That, admittedly, was exceptional. The figure for 1998 as a whole was 11.4% - about the level of returns the sector has enjoyed for the past four years. Most of the banks' profits - in normal years at least - are made by lending to the government. This year the banks have also had a one-off bonus because they...
