Brazilian banks are chalking up “excessive” profits, Economy Minister Paulo Guedes said, adding that the country needs an injection of competition to end what he called the cartels that dominate many of its major sectors.
In testimony to the lower house Finance and Taxation Committee, Guedes said sectors such as banking, oil and postal services reflected a lack of competition that is holding Brazil back and preventing growth from picking up.
Banks did well in the first quarter of the year, lawmakers put to Guedes, even though the economy contracted for the first time since 2016, putting Brazil half way back to recession.
“Banks’ profits are huge, they are really excessive,” Guedes said, noting that Brazil’s handful of big banks, one major oil producer, two main refineries and a distributor points to a ‘cartelized’ economy.
“We need competition, competition is good,” he said, adding that the central bank has made it a priority to help open up the economy, particularly the financial sector.
According to Brazil’s central bank, citing Bank for International Settlement figures, the top five Brazilian banks hold 82% of total banking assets. That’s a higher level of concentration than all other major emerging countries such as India, China, South Korea, Mexico and Singapore.
Guedes repeated that he wants to accelerate the privatization process, echoing his comments earlier this year that if he had his way he would sell “everything”, but noted that President Jair Bolsonaro doesn’t quite share his privatization instincts.
Still, the president is coming round to his way of thinking, Guedes told lawmakers.
He once again struck an optimistic and bullish note on the impact of pension reform on the economy, arguing that approval of a strong package would put Brazil back on the path to growth “immediately”.
Many economists doubt this, and have slashed growth forecasts for this year and cut them for next, even while maintaining expectations that a meaningful pension reform bill will be approved.
The government’s bill aims to save the public purse 1.237 trillion reais (US$ 321 billion) over the next decade through a mix of raising the minimum retirement age, increasing workers’ contributions and other changes to the social security system.