Banco do Brasil S.A.
Banco Do Brasil S.A.
Assets: Cz61.38 trillion (US$81.54 billion)
Stock Index: Brazil
The history of Banco do Brasil intertwines with that of Brazil itself. A Portuguese colony since 1500, Brazil was for centuries held under tight commercial restraint, forbidden any industry except for shipbuilding and sugar manufacturing. Even salt, in this coastal country, was imported from Portugal.
But restrictions were relaxed in the early part of the 19th century as Portugal faced war after ignoring Napoleon’s demand that all European ports be closed to the British. With no prospect of fighting off Napoleon, Portugal’s prince regent, Dom Joáo, his family, and 15,000 subjects fled across the Atlantic Ocean to Brazil. Joao established a monarchy in Rio de Janeiro and improved trade relations between Brazil and Europe. He created the Banco do Brasil on October 12, 1808, before Portugal had its own bank, as the bank for the Portuguese Court. It was Portugal’s principal depository for years.
The bank built schools and hospitals, investing heavily in the country well into the late 1800s. Banco do Brasil also equipped Brazil’s navy in its battles for independence from Portugal in the 1820s. When Brazil became a republic in 1889, the bank was a major player in restoring stability to the country’s economy. Brazil had been left in shambles after the Portuguese conflict, which caused the fall of the monarchy.
During the period of rebuilding, Banco do Brasil became the country’s main bank, the government’s financial agent, and both a commercial and development bank focusing on rural areas, exports, and domestic business.
In the last decades of the 19th century, there was another switch in the country’s structure, when Brazil’s slaves became wage earners. In 1888 Banco do Brasil signed an agreement with the government to ensure the availability of credit for agriculture. The new financing encouraged immigrant settlement in rural areas and was the beginning of an organized push to develop agriculture. The bank opened a branch in 1908 in Manaus, the heart of the Amazon region, to stimulate rubber production. Financial incentives brought people from all over the world, but especially from Italy, to Brazil’s rich and plentiful coffee plantations. The flood of immigrants continued past the turn of the century.
Internally, Banco do Brasil was tightening its house. The bank began giving public exams to new employees. So rigid were the tests that in 1909, ten out of the 35 candidates couldn’t even complete the exam; of the remainder, only nine passed.
In 1937, the bank created its Agricultural and Industrial Credit Division (CREAI). The division provided the country with a credit program to encourage and support agricultural and industrial development. With CREAI’s assistance, Companhia Siderúrgica Nacional, Brazil’s first steel mill, was built in the 1940s.
CREAI was involved in almost every aspect of Brazilian agriculture, from rice, cashew nuts, and fruit to sugar cane and coffee. CREAI’s agricultural activities eventually turned Banco do Brasil into one of the world’s largest agricultural banks.
In 1941, Banco do Brasil laid the foundation for foreign trade support, opening a branch office in Asunción, Paraguay, and then later that same year opening its export and import division.
During World War II, Banco do Brasil provided the troops’ payroll as well as war reparations and money transfers to the Brazilian Expeditionary Force. To help operations, three offices were opened in Italy and mobile units were sent to the front lines. The bank also set up a special system through which soldiers could withdraw or deposit cash using passbook entries.
Banco do Brasil’s foreign activities continued long after the war, and in 1953, it established a foreign trade division. But it was in 1969, with the opening of its branch in New York, that the bank really became international.
The 1960s were a time of upheaval for all Brazilian banks. In 1964, the government, with increasing inflation on its hands, faced the deficiencies of the country’s financial institutions. At the time, short-term lending was the business of commercial banks, which gave them dominance over other financial institutions. Long-term financing was carried out by state institutions, but with growing inflation, these loans were no better than “donations,” wrote Oswaldo R. Colin, chairman of the board for Banco do Brasil, in American Banker.
The 1964 Banking Reform Law totally restructured the banking system. New types of securities became available, special credit services were offered, and medium- and long-term investments were favored. Banks began to compete by offering increased services such as guaranteed overdraft checking rights and credit cards, and competition, especially among commercial banks, heated up.
The reform law and resolutions that followed initiated a move away from small, specialized banks toward larger institutions offering a variety of services. In 1950, for example, Brazil had 404 banks; by 1972, there were only 128. During the same period in the late 1960s and 1970s the number of branches grew from about 4,000 to 11,000.
In 1975, Banco do Brasil created a fund for scientific research, backing many health and agricultural projects such as the manufacture of artifical arteries, vaccines against measles, hydroelectric turbines suited for rural areas, and better methods for extracting sugar from cane.
Supporting Brazil’s business community, especially small businesses, had become a major concern for the bank by the end of the 1970s, and in 1979, the bank created a program that provided financial assistance and technical guidance to small businesses. In 1982 the bank offered a fund to increase agricultural activity, diversify crops, and foster cottage industries. Other projects included building dams, schools, health centers, and small hospitals.
Banco do Brasil entered the credit card business in 1987, signing with Visa International and announcing plans to issue one million cards that first year. Prior to Visa, the bank offered no credit card and up until the mid-1980s handled most of its business through deposits. “Brazil is the largest country in Latin America, with 140 million people, and despite its recent economic problems it has the potential to be a very big consumer credit market,” James F. Partridge, Visa’s chief general manager for Latin America, told American Banker at the time.
In 1988, a new finance minister, Mailson Ferreira da Nobrega, came into power and Banco do Brasil’s president, Camilo Calazans, was replaced by the finance ministry’s general secretary, Mario Berard. The move came on the heels of the forced resignation of Brazil’s central bank president.
Looking ahead to the 1990s, Banco do Brasil intends to diversify activities, increase private sector assistance, moderate interest rates, and play a stabilizing role in Brazil’s financial system.
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