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HSBC goes Latin

Brazil's companies reach out for funds

Bankers in Brazil like to stress that the most severe competition is among domestic banks and that the effects of the arrival of foreign institutions need not be exaggerated. Nonetheless the March announcement that the authorities had agreed to sell Bamerindus to HSBC for $1 billion undoubtedly came as a shock to many.

True, bankers were aware that the Banco Central do Brasil was seeking a solution at Bamerindus, since its prospects were being adversely affected by persistent rumours that it was about to go under. One Brazilian banker remarks that he and his colleagues have "lost the right to complain" since no local institutions stepped in with an offer to save the bank. But he also points out that if the central bank had mentioned what he calls the "ridiculous price" paid by HSBC (and the contract clause that gave HSBC a grace period during which bad assets could be given back to the central bank) there would undoubtedly have been a lot of domestic interest.

Local bankers also acknowledge that a domestic solution would have involved the rationalization of branches, cost-cutting, and many thousands of lay-offs - hardly a politically attractive strategy for the government.

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