BRAZIL HAS SOME of the most profitable banks in the world. Returns on equity regularly exceed 40%, and institutions such as Banco Itaú are often held up as models of professionalism and excellence.
As Brazil struggles out of its latest economic crisis, however, its banking system will have to change radically, and start making money in areas it has long neglected. What's more, the biggest player in international banking, Citibank, could make its long-awaited move into the country at any time. The future for Brazilian banks is not going to be easy.
If any country's banking system has shown itself capable of withstanding enormous shocks and changes, of course, it is Brazil's. The crises of 1999 and 2002 were only the most recent in a series of economic convulsions: you have to go back to the 1970s before you can find three consecutive years when GDP growth reached 3%.
Most of Brazil's banks date back to the days of hyperinflation, with its attendant sky-high real interest rates. Back then, the efficient movement of money was of paramount importance. If your money can lose most of its value in a couple of days, it's crucial that you can get it to a bank quickly and that the bank can immediately transfer it to where you want it to go.