BMG Bank’s Director Believes Brazil’s Economy Will Bounce Back Quickly

Brazil is a country filled with incredible natural resources and ethnic diversity. Brazil is a peace loving nation that tries to remain neutral when it comes to political and religious conflicts, but the country is battling the war of its life this year. Brazil has been hit with a perfect storm, and the country is trying to right itself in the wake of political turmoil and economic disaster. The banks in Brazil have stopped lending money unless loans are 100 percent collateralized and the terms suit the banks. But one bank believes the internal financial and political war will be a short one because Brazil has fought this kind of war before.
Marcio Alaor, the Director and Vice President of BMG Bank of Minas Gerais, thinks Brazil will get its act together in 2016, and he is trying to help that process along by offering consignment loans to middle-class Brazilians that need money for cars, homes and necessities. BMG Bank has a product they call payroll loans, and it is a huge success. Middle-class Brazilians can borrow money and us their income as collateral. The bank works out terms that suit the bank and the borrower, and the bank offers the borrower an interest rate is lower than the standard rate.
Mr. Alaor thinks the economy must be stimulated in order for it to recover. One way of doing that is to put more money in the hands of consumers. Alaor thinks the government should cut taxes, so workers have more money to spend. He also thinks the country must find a way to increase exports. BMG Bank believes now is the time to do those things because the Real is so undervalued this year. BMG Bank wants to give consumers more money to spend while the government works on a plan that will curb inflation. The government has its own set of credibility issues to deal with, so inflation may continue to eat disposable income next year.
If BMG is successful increasing the number of payroll loans it executes this year and next that will help the economic situation. Other banks are following BMG Bank’s lead in the consignment credit market. Executing more loans is not the complete answer to Brazil’s challenges. The political situation must be resolved, and BMG Bank sees some progress in that regard. If Brazilians can regain the faith they had in the political system that will be a major step in the recovery, according to Alaor.

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