Brazil’s Bankers Mute After Santander Apology to Rousseff

With Brazil’s stocks rallying every time President Dilma Rousseff slides in the polls, the October election is all the market is talking about -- behind closed doors, that is.

Representatives of six Brazilian and foreign banks, brokerages and funds said they’re no longer willing to comment publicly about politics, with some citing the risk of government retaliation. All of them asked that their identities and the names of their firms not be revealed.

Banco Santander Brasil SA’s public apology last week for saying the economy could worsen if Rousseff’s chances at re-election improve triggered private discussions inside at least two major banks over what their analysts should be allowed to say, according to two of the people with direct knowledge of the matter. Rousseff told journalists on July 28 that Brazil shouldn’t “accept any level of institutional interference from any member of the financial system in electoral and political activity.”

The government’s reaction and Santander’s apology “are a sign that things are not going well,” Wagner Salaverry, who helps manage about 15 billion reais ($6.7 billion) at Quantitas Gestao de Recursos SA, said by telephone from Porto Alegre, Brazil. “Polls favorable to opposition candidates spurred investors to buy stocks. That’s what’s on everyone’s minds. If the government doesn’t like it -- tough.”

The press office at the presidential palace didn’t return a request for comment. Rousseff’s campaign press office declined to comment, as did the nation’s banking association, Febraban.

Political Bias

Santander apologized for a client note that linked the economic outlook to the elections in a July 25 posting on its website that was later removed. It said the note didn’t reflect its position and violated a directive that economic analysis sent to clients not contain political bias. Its press office referred Bloomberg News to the statement when asked by e-mail about its response to Rousseff’s July 28 comments.

Santander Chairman Emilio Botin told journalists in Rio de Janeiro today that the bank “has taken all conceivable internal measures” against the employee or employees responsible for the report, according to a Santander official at the press conference who asked not to be named, in keeping with the company’s rules.

Public opinion polls show Rousseff’s lead ahead of voting in October is narrowing as inflation accelerates and growth slows. Equity markets rallied after a Datafolha poll earlier this month showed Rousseff doesn’t have a lock on re-election. The Ibovespa benchmark index has gained 27 percent since mid-March, the most among the world’s 20 biggest equity gauges.


Companies have refrained from raising capital or making investment decisions until after October because future government policies will depend on who wins the elections, said Rogerio Freitas, a partner at hedge fund Teorica Investimentos.

There were no initial public offerings in Brazil this year, the slowest start to a year since at least 2004, when Bloomberg began compiling data on equity offerings in the country.

“For new listings to happen there’s got to be a change of government,” Freitas said by telephone from Sao Paulo. “If an opposition candidate wins, stocks will rally, and only then we may see companies starting to make plans to sell shares again.”

Tony Volpon, an analyst in New York for Nomura Securities International, said researchers shouldn’t stifle their comments based on political concerns.

“Analysts should keep talking about politics, because it’s part of what they do,” Volpon said in an interview. “Though everything must be based on analysis.”

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