Brazilian banks have enjoyed double-digit base rates for much of the past 20 years. The couple of times rates have dipped into single figures for a year or so they have rebounded quickly.
However, this time that spread isn’t expected to rebound. On the contrary, the markets are pricing in further falls with a lurch down to a new all-time record floor of around 5.5%.
Worse: competition is also finally picking up. The Brazilian Central Bank had allowed the banking sector to consolidate to an incredible degree.
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