Brazilian Bank BMG Has Been Helping Wholesalers And Retailers In Brazil For Decades
Brazil hasn’t always had the best retail environment. For years, the government of Brazil wouldn’t allow wholesalers and retailers to import merchandise from other countries. Trying to buy something that was not made in Brazil was a chore for years, but the government started to change their position on imports in the last ten years. Once the ban on imports was lifted the retail business started to come alive.
But the real change came when the government decided to switch from an export-based economy to a consumer based economy, according to the CEO and President of BMG bank, Ricardo Guimarães. In order to make that change, the government had to give banks enough incentive to loan money to what the country was calling the up-and-coming middle class. Banks like BMG developed new financial packages that helped average Brazilians buy cars, houses and merchandise. Brazil’s economy started to boom because of middle-class borrowing and the increase in exports to China.
But now, Mr. Guimarães and other bankers noticed a major decrease in retail sales. The bankers know that inflation and the recession are two of the culprits for the retail slump. Retail sales dropped by 1 percent in August, according to Guimarães, and that was after the 1.6 percent decline in July sales. Retail sales have dropped seven times in the last seven months, and BMG blames weak consumer confidence and the political fiasco for some of the decline.
The government is trying to bring the demand back, but high-interest rates, escalating unemployment and a weak currency are keeping Brazilian out of the stores. BMG bank executives are confident that the exposure they have in terms of consumer loans is small, but if the situation in Brazil continues to deteriorate, many banks are going to be hit with major losses due to loan defaults.
BMG is a leader in payroll loans and payroll management as well as vehicle financing. The bank has never experienced a position of weakness in the last 80 years, and Ricardo Guimarães said that will not happen in this tough economic situation either.
Mr. Guimarães and other BMG executives believe that at some point soon there will be new political agreements made to increase consumer spending. BMG is one of the banks that can ride out the economic downturn because the family owned bank put a strategy in place to protect their assets, plus the special committee that approves all bank loans is extremely conservative.