Tuesday, 27 January 2009

Meirelles Learn From Lula Cabinet to Play Hardball with Banks

Henrique Meirelles (photo,) one of the few serious policy makers that are left in Brazil these days, is expected to announce by the end of this week rules that will allow 4,000 and more companies to access international reserves through special credit facilities. The measure was announced late last year as a way to protect companies reeling from a recent sell-off in the real. Folha de S. Paulo says in a short note today (click here for link) that financial institutions will not be given access to this credit facilities, to press them to lower lending rates charged to companies and consumers.

While it's desirable to see banks lowering their spreads now that local interbank credit is not under stress, it is stupid to expect private lenders to do this by decree. The government is committing absurd mistakes in the handling of this issue of credit, such as conditioning BNDES credit lines to companies to their maintaining idle staff in their payrolls ... how anti-economic is that? The government is seriously concerned with the unemployment data readings, meaning that they see the economic downturn as prolonged and painful.

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