Why were Brazil’s booming banks not able to avert a workers strike?

Hypothesis #2: Simple Disregard

If anyone from an "advanced economy" has experienced a Brazilian bank, they will know that banks fall into the Latin American institutional norm – they’re frustrating and dismal. Line-ups are long; one can easily wait upwards of 20 minutes in non-peak hours. They’re dismal because banks in Brazil don’t have the tidy, shiny, or homey appearance of North American and most European banks – they’re industrial. Rather than the neat cordons of airports, you’ll often find yellow tape on the floor demarcating where the cattle are supposed to line-up. The lights are all raw fluorescents, and decoration and attention-grabbing ads are scarce. Oh yeah, Brazil’s banks also have insultingly bad hours: they open late – typically around 10 or 11 am – and they shut early, at 4 pm. There is also a strong two-tiered system emerging, as in other parts of the world – VIP “prime” and regular customers – but that is another blog post.

Banks in Brazil also practice extreme usury. As I blogged about just under a year ago, a new bank account I obtained included a line-of-credit I didn’t ask for, and if I hadn’t looked hard at my statement I would have assumed that the sum of my line of credit was part of my bank balance. Very sneaky. That line of credit could be mine… for just 186 percent per annum. Brazil has among the highest interest rates in the world, and many lower-middle class consumers are currently getting crushed under unmanageable debt. A few responses to this debt include: personal defaults and crime, both of which raise the price of credit. Bravo banks and central bankers.

All in all, it seems that the "simple disregard" hypothesis is more an observational lament than a hypothesis.

Hypothesis #3: Strikes Help Bank Profits by Changing Consumer Behavior

A further possibility points to the hypothesis of a decoy. Banks may find that annual strikes drive consumers to the machines, telephones, and online – getting them out of branches – thus moving customers towards habits that are more lucrative for banks. Let’s start close to home: during the strike, my wife Carolina finally arranged online banking options to pay all her major bills.

I’m certain Carol won’t be the only one to save banks a lot of money in reducing branch visits, not to mention improving service fee profit expectations. The Globo newspaper provided a list of suggestions on how to deal with the banking strike about two weeks ago. Unsurprisingly, online, telephone, and bank machine options figured prominently among potential solutions.

So for what it’s worth, there you have it, the conspiracy theory hypothesis: banks may be stingy or suffer collective action dilemmas, but they do not appear reluctant to let customers hang for two or three weeks every year. It ultimately reduces their operating expenses in the long term by getting customers to practice non-branch related banking practices.

Now if only the media would provide some in-depth coverage of these strikes in the first place, we might have a better idea of whether this crazy conspiracy theory holds water.

--- Greg Michener, based in Rio de Janeiro, writes the blog, Observing Brazil. He is currently writing a book on Freedom of Information in Latin America for Cambridge University Press.

Previous

1 | 2