UBS has finally won its long-delayed banking license in Brazil. Champagne all around? Not quite.
Most international investment banks are in headlong retreat in the Brazilian market. Raymond James just announced it is closing its research arm in Brazil. It is just the latest retrenchment as Brazil’s capital markets prove less lucrative than expected.
That may seem like just part of the global IB retrenchment but there are local causes aggravating the situation.
There are a number of reasons. Local banks have successfully tapped the market for leading executives, paying much higher salaries (some 50%) than would be typical in New York. They instinctively know how vital contacts are to win business in the Brazilian market. These banks have also been able to supply more loans to local companies at a time when international banks are constrained. With the local corporate debt market and local asset managers looking the most promising parts of the market, that lead is likely to grow stronger.