MercoPress. South Atlantic News Agency

Lula da Silva “obsessed” with reducing bank rates

Aldemir Bendine named as a new boss of Banco do Brazil

Brazil named Aldemir Bendine as chief executive of federally owned Banco do Brasil Aldemir Bendine seeking to boost lending in the country's financial system and lower borrowing costs. Bendine, a Banco do Brasil veteran who was previously in charge of its credit card and new retail business, succeeds Antonio Francisco de Lima Neto as CEO.

“Public banks have the fundamental task of increasing credit and competition” Finance Minister Guido Mantega said at a news conference. However he denied there was political interference in the CEO decision

Antonio Francisco de Lima Neto offered his resignation to Finance minister Mantega earlier in the week. His successor is expected to take over on April 29. Under Brazilian law the president, in this case Lula da Silva, has the authority to name and remove the bank's administrators.

Since the world economic crisis began to slow Brazil's economy last year, Lula da Silva has often mentioned the need for banks to slash commercial lending rates to boost economic activity.

In February, he called for rate cuts to “fit with the new reality” of a credit crunch that had dried up loans and increased commercial interest rates across the world.

Pressure to cut rates has mounted since Brazil's unemployment rate reached 8.5% in February, with labor leaders complaining that high lending rates were causing credit-strapped companies to eliminate jobs.

Analysts are predicting Brazil's economy will contract this year, increasing the likelihood that its central bank will keep cutting its benchmark lending rate. Commercial banks must follow suit, President Lula da Silva has repeatedly insisted.

“The reduction of bank spreads at this moment is an obsession” Lula da Silva said, referring to the difference between the interest rates banks charge borrowers and pay out to savers.

Since Banco do Brasil is 66% government owned, it already offers far cheaper loans than most of Brazil's commercial banks, charging an annual rate of 28.2%, compared to 55.9% at Itau Unibanco Banco Multiplo S.A., the country's largest bank.

But state-run banks should do more to help get credit flowing again, Finance Minister Guido Mantega said: “In this moment of crisis, public banks have a vital role to fill.”