Igor Cornelsen: Brazilian Banking Tips

Surprise Turnaround in 2014

According to Igor Cornelsen on tumblr, no one expected to see Itau Unibanco (ITUB) and Banco Bradesco (BBD) to do well amidst the troubled Brazilian Economy at year end 2014. In the third quarter of 2014, both Itau Unibanco and Banco Bradesco saw their shares rose. They also reported an increase in profit. Banco Bradesco’s profit grew by 36% and Itau Unibanco’s by 28%.

How Did They Do It?

People wondered how Brazil’s two top private banks were able to weather the storm. Igor Cornelsen said that knowing how the market operates helps, and also learning from past experience during those troubled times. Moreover, the top two banks only pass out loans to customers with excellent credit, which helps to cut unnecessary costs making the banks more secure. People with sub-par credit were forced to rely on public banks.

What is the Attraction?

Brazil boasts a tremendous amount of natural resources, and the population is increasing. With such an increase, there is a high demand to develop infrastructure. Brazil is among one of the world’s top food producers.

What to Do Before Investing

Igor Cornelsen has prepared a little cheat sheet for investors to follow. Currently, Brazil is seen as the largest economy in South America. First, Banco Itau has increased its profits since merging with Unibanco in 2008. Other successful banks include Banco Bradesco, Caixa Economica Federal, HSBC, and others.

Secondly, Joaquim Levy, the new finance minister, is seen as hope for the banking economy. He has earned a Ph.D. from the University of Chicago, and he has worked for the IMF. He knows how to create policies and how to work with the private sector. Levy is fairly new, but people are still hopeful given his background.

Thirdly, keep an eye on China. Both Brazil and China are wrapped up in trade agreements. If China has a healthy economy, it means that Brazil will see a price increase in their raw materials. On the downside on ireport.cnn.com, China is an enormous competition for Brazil when it comes to exporting industrialized goods to other Latin American countries. Knowing how a country’s trading partner operates will help in making critical investment decisions.

Finally, Brazil’s currency is overvalued making the exporting of industrialized goods lose its competitive edge. It has also created an account deficit. To make up for the loss, Brazil’s Central Bank had to sell dollar swaps in the local market. As a result, the currency is still overvalued.