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Economy

A bank with all the look of Brazil

Thesis scrutinizes changes the BB has been through, with its duality of thriving in the market and, at the same time, being the government's cashier

EDUARDO CESAR Door of the safe at the first São Paulo headquarters: difficulties with the reformsEDUARDO CESAR

Over decades, the Bank of Brazil was a synonym of national identity, financial stability and an unbeatable perspective of the future for its staff, who made up an enviable elite of Brazilian workers. In the 90’s, though, with the process of liberalization of the economy started by the government of Fernando Collor de Mello (1990-1992) and intensified by the two administrations of Fernando Henrique Cardoso (1995-2002), the image of the Bank of Brazil has undergone an absolute change. The peak occurred in 1995, with the restructuring process in the form of a wide-ranging Voluntary Termination Program.

“This dismissal program was like a metaphor for the changes happening in the country at that moment”, says Lea Carvalho Rodrigues, author of the thesis Bank of Brazil: Crisis of a State Company in the Context of Reformulation of the Brazilian State, defended at the State University of Campinas (Unicamp). “The Bank of Brazil had a meaning in the Brazilian imagination, as an instrument for the development of the nation, and, in the words of the then director of Human Resources, the stability of employment in the BB was a national value. With the restructuring, these values were checkmated.”

The work accompanied the changes in the bank, in the period from 1995 to 2000, and registers the most significant moment of the ruptures of the institution with its staff and with Brazilian society itself, in the search for a reduction in costs and improvement in results. This modernization may have altered the very mission of the bank, which like every state-sector company had a double role: to work on the lines of a private company, aiming at profit and the competition, and, at the same time, tied up with the interests of governments and subject to demands for the concretization of social objectives.

“The bank’s function used to be to promote the development of the country. With the neo-liberal policies of the 90’s, the mission came to be to contribute towards the development of the nation. That is, contributing means here merely acting like any other company: generating profit and, in this way, promoting national development”, notes Lea, who started the research with the thematic project carried out at Unicamp, Brazilian Business Culture: A Comparative Study on Public, Private and Multinational Companies, coordinated by Professor Guilhermo Raul Ruben and financed by FAPESP. It was Ruben was supervised her thesis for a doctorate.

The Bank of Brazil’s strategic change had as its target abandoning its original and century-old vocation of being a state-sector bank in the “old style”, and of starting to follow the path of competitiveness, one of the key words for understanding the macroeconomic movement of the 90’s. The decade was marked by the split with the developmental project of yore, in favor of speculative capital, with the implantation of liberalizing policies that aspired to a pattern of growth centered on a new international placement and on a redefinition of the role of the State, combined with the stability proposed by the Real Plan. The Bank of Brazil, then, served as one of the pillars of this new economic policy. Declarations by the president of the bank, at the time, justified the BB’s personnel restructuring measures as a national project, which meant a different and far less close relationship of the State with society.

“The alterations to the Bank of Brazil were part of the program of President Fernando Henrique Cardoso to contain the trade union movement in the state sector. In 1995, the federal government was trying to approve complex reforms, such as the social security, tax and administrative ones, and everything points to the fact that in breaking the stability of the staff of the Bank of Brazil, the objective was to conduct these reforms more easily, as they also called for a paradigmatic alteration in very deep-rooted cultures”, the researcher explains. “The Bank of Brazil was strategic for this reform of the State”, she goes on.

The restructuring of the BB was part of an orientation that came from international organisms to reformulate the financial sector, the process which started in the government of José Sarney (1985-1989). These guidelines indicated that the financial system had to be adapted to the new world order, with the market opening up to the foreign sector and the privatization of state and federal banks. With changes like this, the Brazilian financial sector altered its looks completely. Many state banks were privatized and the small private banks were weakened and taken over by large financial groups, in an ample process of mergers and acquisitions. At the same time, these same groups began to feel threatened by the entry of foreign companies into the country.

Faced by the strength of these foreign institutions, another discussion, also an old one, became more moderate in the offices of the executive branch: the privatization of the Bank of Brazil. “At the end of the 90’s, with the advance of the Spanish banks, it seems that nationalism was reborn a bit, and the idea of privatization lost strength. Now, with the new government of Luiz Inácio Lula da Silva, the tendency is for this theme not to have so much importance”, Lea believes. “Even so, I think that the bank has a serious identity crisis. The BB only makes sense if it is connected with a project for a nation. Otherwise, being in the hands of the State doesn’t make sense”, the researcher explains.

Deficit
The modernization of the BB did not imply only the dismissal of staff. In parallel to the termination program, the bank announced the winding up of activities of 103 branches out of a total of 600 loss-making units, the majority in the north and northeast of the country. It was a fact that provoked reactions of dissatisfaction from the local communities, which set in motion their representatives in Congress to negotiate the measures. Many members of parliament thought that the closure of the branches would jeopardize the possibility of developing the needy regions, by virtue of the traditional nature of the bank in fostering local development.

The movement against the dismissals and the closure of the branches led the president of the republic to manifest himself in favor of the measures, with the argument that the BB would go bankruptcy, if they were not put into effect. “This was a period when the bank’s information technology was precarious, and, in terms of administration, the situation was chaotic. Technological innovation was only to come three years later, in 1998”, Lea explains.

One of the arguments for restructuring the BB was the losses returned by the institution in the post-Real Plan period, which caused a fall of 87% in the bank’s revenues, just in the second half of 1994, far higher than the average of the other banks. “The Bank of Brazil had to keep operating in dollars abroad, for the government to be able to honor its external commitments, instead of investing these funds in the domestic market and gaining from the appreciation of the local currency and the high interest rates then ruling”, she observes.

It is quite true that the BB ended the year 2002 with a net profit of R$ 2.028 billion. The result is 87.4% higher than the profit for 2001. The profitability on average net worth in the year was 22.6%. Just in the fourth quarter, the net profit grew 80.7%, compared with the same period of the previous year, and it added up to R$ 600 million. But the impact of arriving at these figures was felt at several dramatic moments. Restructuring implied a brusque fall in the number of customers. In 1994, there were 20 million current account holders, and two years later this had fallen to 6 million. It was only to arrive at 10 million customers, half of what it had had six years previously, at the end of 2001.

Stability
In 1995, there were also 12 occurrences of suicide registered among bank staff, four of them with the termination program in full activity, having started only in the second half of that same year. According to the thesis, the stability of the BB’s staff had an importance for the professional future of its employees, with a guarantee of salaries and benefits, a possibility of career progress, adapting the interests of the company to those of the member of staff, and it also brought security to their private lives.”The bank was an extension of the home. And if on the one hand it can be said that this stability generated tranquility, in many cases indifference, in others, difficulties with innovation, but it is also true that these close bonds with the company generated a high degree of commitment and dedication”, is Lea’s analysis.

Even with its criticism and crises, the Voluntary Termination Program was regarded as an international model of success, for the strong adhesion to it. It achieved 80% of what the company intended. At the first moment, some 13,000 members of staff left their jobs, and, two years later, the reduction in the workforce was in the order of 43,000 employees, or 37% of what it was in 1994.

For Lea Carvalho Rodrigues, the changes in the BB reflect the alterations in the country itself, under the auspices of the volatility of the markets and of the international economy. “But, in spite of the alterations to it, the BB still is the portrait of Brazil”, the researcher concludes.

The project
Bank of Brazil: Crisis of a State-sector Company in the Context of the Reformulation of the Brazilian State (nº 97/11257-8); Modality Doctorate grant; Supervisor Guilhermo Raul Ruben – IFCH/Unicamp; Grant holder Lea Carvalho Rodrigues – IFCH/Unicamp

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