BOO HOO! INFLATION'S OVER
Brazilian bankers have every reason to agree with the slogan which the Finance Minister, Dilson Funaro, likes to repeat with religious fervour: "This is a new country now." It is, and, for banks, a coldly unpleasant one.
Since February 28 was declared a bank holiday, so that an anti-inflation programme could be announced, the banks have been deprived of "monetary correction", the form of indexing which worked so much to their advantage.
Fernao Bracher, president of Brazilhs central bank (and until last August a private sector banker) admitted that the banks had suffered "very big losses".
It seemed to come as a complete surprise. On February 27 the biggest private sector bank, Banco Brasileiro de Descontos (Bradesco), ran an advertisement which boasted of the opening of dozens of new branches all over the country. It had been opening branches at the rate of more than one a day throughout 1985, closing the year with 1,916 (Euromoney, March 1986).
When Brazilian banks were living high off the hog, they were taking deposits cheaply and making loans at rates indexed to the monetary correction adjustment factor for the month (which also applied to government bonds).