According to the old joke, Brazil is the country of the future — and always will be. Investment bankers can be forgiven if they don’t see the humor.
International investment banks that were counting on Brazil to make up for problems in their home markets have been sorely disappointed as Brazilian deal volume has slowed down this year and domestic players have won a larger share of the business. Unless the market recovers soon, foreign banks are likely to put their expansion plans on hold or even make cutbacks, industry executives say.
Virtually all the major international firms, including Bank of America Merrill Lynch, Barclays Capital, Deutsche Bank, Goldman Sachs Group and JPMorgan Chase & Co., have been building up their Brazilian operations in recent years, hiring bankers, traders and back-office staff. In contrast to the weakness in the firms’ domestic markets, Brazil’s strong economic growth, unfettered capital markets — a stark contrast to the other BRICs — and surging deal flow persuaded many bankers that the country offered seemingly boundless opportunity.
The foreign invasion coincided with a big domestic buildup. Leading local players such as Banco do Brasil, Banco Bradesco de Investimento, BTG Pactual, Caixa Econômica Federal and Itaú BBA have beefed up their businesses substantially, as have international banks with a long-standing presence in the market, such as Credit Suisse and Banco Santander. The result is one of the most competitive investment banking markets in the world, with at least ten firms slugging it out for supremacy.....