Brazil targets a dollar floor of 1.80 Reais and questions private banks attitude

Tuesday, April 10th 2012 - 16:30 UTC

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Having a floor of 1.80 Real to the US dollar is no great thing, but it is a target to sustain said Brazil Development, Industry and Foreign Trade minister Fernando Pimentel referring to the latest announcements to promote Brazilian industry battered by a strong currency and massive inflow of ‘cheap’ imports. Read full article

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ChrisR
I have real problems deciding whether this Minister understands the role of private banks.

It is the MARKET which dictates the rate at which banks will loan, based on the risk to reward criteria.

Which banks would loan money to Argentina at any rate? Probably none. But what about Uruguay? Many will.

The reasons are clear, the bank not only wants the interest to service the loan it will want the principal back as well.

It is EXACTLY the same with loans to industry and small businesses. Banks cannot lend to delinquents and are quite right to have higher rates for less than blue chip risks.

If Brasil starts meddling with the banks it will only further damage the economy which is already stalling.
Apr 10th, 2012 - 04:48 pm - Link - Report abuse 0
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