J.P. Morgan Chase and Bank of America reduce operations in Brazil

www.sfgate.com Thursday, January 30, 2003

(01-30) 07:13 PST SAO PAULO, Brazil (AP) --

Two major U.S. banks are pulling back from Brazil, joining a growing number of foreign banks reducing their exposure to South America's largest economy after taking a beating in the markets last year.

J.P. Morgan Chase & Co. said this week it will sell its Brazilian asset management division, J.P. Morgan Fleming Asset Management, to Banco Bradesco for an undisclosed price. About $1.9 billion in assets will be transferred to Bradesco, Brazil's largest privately owned bank

Meanwhile, Bank of America will cut about three-fourths of its work force of 200 in Sao Paulo, eliminating its investment banking operation.

The moves came three weeks after Spain's Banco Bilbao Vizcaya Argentaria sold its Brazilian retail and investment banking operation to Bradesco for $600 million and a 4.5 percent stake in Bradesco.

Volatility in Latin America markets last year was a major reason why the banks decided to scale back. Brazil's currency, the real, lost 35 percent of its value last year while the main stocks index fell 17 percent.

Brazil's interest rates, inflation and unemployment remain high in a sluggish economy despite pledges by the administration of the country's new leftist president, Luiz Inacio Lula da Silva, to maintain sound fiscal policies.

Silva, who took office Jan. 1, has generally pleased investors with the appointment of fiscal moderates to key economic posts and a pledge to honor Brazil's obligations, including massive foreign debt.