Why were Brazil’s booming banks not able to avert a workers strike?
Despite the fact that Brazil's banks boomed while the world’s banks reeled amid global economic turmoil, strikers just caused havoc in the industry for three weeks. Blogger Greg Michener offers three hypotheses for 'what gives.'
Few other countries can boast banks whose profits were more fabulous than Brazil’s in 2010. As much of the world’s banks cowered under the threat that consumer and national debts might lead to insolvency, Brazil’s banks boomed. According to the Economist, the sector enjoyed returns on equity of more than 25 percent, and the nation’s biggest private bank, Itaú, reported earnings of $8 billion, 32 percent higher than in 2009.Skip to next paragraph
In surprise landslide, Jamaican opposition wins back power
Parading back to Rio de Janeiro: the bookish and brainy
After dramatic 2011 in Cuba, will US-Cuban policy shift in 2012?
Boom goes the churro: Chilean court upholds damages for exploding sweets
Why did Hugo Chavez spam Venezuelans on Christmas?
Subscribe Today to the Monitor
With all this financial success, why were Brazil’s banks not able to avert a 21-day banking workers strike that just ended today? Could they not have shared a modicum of their success to keep unionized workers in check? Was it stinginess motivated by concerns over stock valuations? A collective action dilemma among the National Federal of Banks? Were union demands simply unreasonable? It is difficult to tell given the shoddy quality of reporting. A more enticing possibility is that banks were happy to put customers in a position where they were forced to develop online, telephone, and banking machine experiences that might ultimately benefit the banks’ bottom line.
Brazilian banks have earned stellar returns over the last decade. As a result, they have become internationally renown for their strength: Itaú now places among the top ten largest banks in the world, and two Brazilian banks placed among the top 12 strongest banks in a famous Bloomberg Markets ranking published earlier this year. Given unprecedented banking prosperity, it would seem odd that Brazil has experienced coordinated strikes by the national bank employee syndicate during the last eight years. This year’s strike involved 36,000 workers; over 9000 branches took part – almost half of the nation’s branches. In 2009 the strike lasted 15 days. This time it lasted 21.
The core demands of union workers don’t appear unreasonable. They sought a 12.8 percent salary adjustment, which, subtracting inflation, means a 5 percent raise on their pay. Base salaries for branch personnel are already relatively low, well below 2000 reais ($1,140). The National Federation of Banks was originally offering 8 percent, or a 1 percent raise. They finally did cede to an upper limit augmentation of 12 percent, and also met demands such as increased profit-sharing and a few workplace-related demands. All-in-all, it seems as though the strike could have been long over before it even started. So why a three-week strike?
Disregard for Customers and Employees
Although the media was quick to associate customer frustrations with the striking workers, the National Federation of Banks may be the guiltier party. They shut consumers off from the services that their deposits pay for – for three weeks. It was their responsibility to work out arrangements with employees before the strike ever had a chance to get off the ground. None of this came out in the Brazilian mainstream media, of course. Brazil’s banks are some of big media’s largest advertisers; and big customers don’t get rough treatment from the Brazilian media. Indeed, coverage of the banking strike was remarkably sparse and superficial.
But blame aside, why again, did the banks act so intransigently?
Hypothesis #1: Inflation-Related Concerns
One possibility is that banks sought to avoid the inflationary effects of giving-in to a salary hike. Not only would banks look like a pushover, they might also flame the fire of generalized wage and price inflation, which is bad for the economy and bad for bank business. But 21 days of playing hard to get is just not reasonable behavior for the banking sector, or a convincing explanation.