Author: Antonio Guerrero

STATE-OWNED BANKS TO BOOST ENDING

By Antonio Guerrero

Brazil's government is investing more than $500 million this year recapitalizing two state-controlled banks to boost lending.

The nation's Treasury will invest $269 million in the BNDES national development bank and another $242 million in the federally-controlled Caixa Econômica Federal retail bank. Finance minister Guido Mantega predicts the move will allow government banks to outpace private sector competitors in terms of loan growth, with Caixa Econômica Federal alone expected to increase its loan portfolio by 40% this year, compared with 17% for the overall banking sector.

The Brazilian finance ministry predicts the country's economy will grow between 4% and 5% this year, taking a more positive tack than the central bank's 3.5% outlook. Although the central bank based its more conservative forecast on 2011 economic conditions, the finance ministry also factored in an expected drop in interest rates and a more favorable currency exchange environment.

In order to reach its inflation and budget deficit targets, the government plans to cut as much as $32 billion in spending. With a GDP of $2.5 trillion, Brazil overtook the UK to become the world's sixth-largest economy in 2011, according to the London-based Center for Economics and Business Research. The IMF projects Brazil will move into the number-five slot among the world's largest economies, surpassing France, by mid-decade.

Brazil's growing luxury retail market is attracting upscale US and European retailers to the country's shopping districts. According to MCF, a Brazilian retail consultancy, luxury retail investments were $2.6 billion in 2011 and will rise by 25% this year. A study presented at the Private Banking Latin America 2011 conference in Miami indicated 19 Brazilians have become millionaires each day since 2007.

Knight Frank, a global real estate consultancy, says there were more high-net-worth individuals in Brazil than in Russia and India in 2010, when the country also reported more billionaires than Saudi Arabia, France or Italy. Alshop, a Brazilian shopping center association, reported a 12% year-on-year rise in nationwide shopping center sales last year, to $56 billion. Another 113 new malls are slated for completion by 2014, with an investment of $2.83 billion.