Reuters: US Dollar Report: UPDATE 2-Brazil's Rousseff presses banks to cut lending rates

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UPDATE 2-Brazil's Rousseff presses banks to cut lending rates May 1st 2012, 01:42 Mon Apr 30, 2012 9:42pm EDT * Private banks have room to cut lending rates - Rousseff * High Brazil interest rates must fall to international level * Government aims to boost economy through consumer spending By Hugo Bachega BRASILIA, April 30 (Reuters) - President Dilma Rousseff turned up the heat on Brazil's private banks on Monday, warning them that her government would be "firm" in demanding they cut their lending rates in tandem with the central bank's falling benchmark interest rate. "It's inadmissible that Brazil, which has one of the most solid and profitable financial systems, continues to have one of the world's highest interest rates," Rousseff said in a speech on the eve of the Labor Day holiday. The government says private lenders have failed to pass on lower borrowing costs to consumers and businesses and points to recent cuts by state-controlled banks as proof that commercial banks have room to reduce the rates they charge on loans. Boosting consumer spending is a government priority to stoke the country's economic growth which sputtered to a rate of 2.7 percent in 2011 after a blazing 7.5 percent expansion in 2010, but that will require an adequate supply of affordable credit. Brazil's bank spreads, or the difference between what they pay out in interest to depositors and what they charge in interest on loans, are among the world's highest. The central bank's monetary policy committee cut the benchmark Selic interest rate to 9 percent on April 18, near historic lows for Brazil but exorbitant compared to rates close to zero in struggling developed nations. "The Brazilian economy will only be fully competitive when our interest rates, be it to the producer or to the consumer, match those practiced on the international market," Rousseff said. Rousseff will meet with pro-government political party leaders on Wednesday to set out an action plan to force down the lending rates banks charge. Finance Minister Guido Mantega will also make a presentation at the meeting. State-controlled lenders Banco do Brasil < BBAS3.SA >, Brazil's largest, and Caixa Economica Federal <C EF.UL> were the first to reduce their spreads, prompting others to follow. Banco do Brasil reported a jump in demand for its consumer and business credit lines after slashing its interest rates earlier this month. The country's two biggest lenders, Banco Bradesco and Banco Itau said in mid-April they would lower rates in response to the government's calls and after cuts by rivals HSBC and Banco Santander Brasil. Separately, Rousseff, Brazil's first female president who took office in January last year, said the government would aim to make "measured" tax cuts and pursue an exchange rate that would stimulate exports of industrial goods and farm produce. Link this Share this Digg this Email Reprints

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