Cablegate: Mid-Sized Brazilian Banks Experiencing Liquidity Problems,
DE RUEHRI #0298 3021015
ZNR UUUUU ZZH
R 281015Z OCT 08
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4680
INFO RUEHBR/AMEMBASSY BRASILIA 1011
RUEHSO/AMCONSUL SAO PAULO 5202
RUEHRG/AMCONSUL RECIFE 3471
UNCLAS RIO DE JANEIRO 000298
STATE FOR WHA/BSC, WHA/EPSC
E.O. 12958: N/A
TAGS: ECON EFIN BR
SUBJECT: MID-SIZED BRAZILIAN BANKS EXPERIENCING LIQUIDITY PROBLEMS,
FURTHER VOLATILITY EXPECTED
REFS: A) Brasilia 1299, B) Sao Paulo 486
1. Summary. Mid-sized banks in Brazil are experiencing liquidity
problems since the onset of the global financial crisis, BBM Bank
CEO Pedro Mariani Bittencourt told Amb. Sobel on October 20.
Bittencourt predicted further global market volatility over the next
few months, which will continue to affect the banking sector in
Brazil. End Summary.
2. On October 20, Ambassador Sobel met with Pedro Henrique Mariani
Bittencourt, President and CEO of Rio de Janeiro-based BBM Bank.
BBM is Brazil's oldest private-sector bank and one of Brazil's
leading mid-sized financial institutions. Mid-sized Brazilian banks
play a significant role in making credit, especially structured
credit, available to smaller and mid-sized companies who often
cannot obtain such funding from larger banks or the capital markets.
As such, BBM and other mid-sized banks play an important role in
making additional credit resources available to Brazil's
increasingly vibrant middle-market corporate sector.
3. Bittencourt said that most mid-sized banks in Brazil have been
experiencing liquidity problems as a result of the global financial
crisis. Corporations needing money have begun to exercise the put
option, he said. Liquidity problems were alleviated in the second
and third week of the crisis as money began coming in from the big
banks and the public banks to the mid-sized banks. However, he
said, this money will not be enough to solve the problem.
Bittencourt predicted that the Brazilian banking sector will
continue to be affected by further global market volatility over the
next few months and identified key issues for the industry to
consider, such as how to roll over debt and how to discount new
4. Ambassador Sobel and Bittencourt also discussed the implications
on the banking sector from the drop in consumer confidence.
Bittencourt indicated that 10 percent of the finance in Brazil comes
from trade finance, which will suffer when people do not want to
spend money. The loss of confidence by consumers is becoming more
evident by the fact that companies and the general public are moving
to have their deposits on demand because of fears of a crash.
5. This message was cleared/coordinated with Embassy Brasilia.