news.ft.com By Jonathan Wheatley Published: February 2 2003 20:03 | Last Updated: February 2 2003 20:03

A few months ago, Brazilian bankers were speaking darkly of the dangers the country faced if Luiz Inácio Lula da Silva of the leftwing Workers' party (PT) were elected president.

One month after Mr Lula da Silva took office, the sector could hardly be more ebullient.

Bradesco, Brazil's biggest private-sector bank by assets, is expected to announce healthy fourth-quarter profits today after starting the year in a mood of aggressive expansion.

On January 2, it became one of the first Brazilian companies to return to the capital markets, launching a nine-month international bond, raising US$250m - five times its initial offer - priced to yield 6.375 per cent.

On January 13, it surprised the markets by announcing that it would pay R$2.65bn (US$804m at the time) in cash and shares for the local operations of Spanish bank BBVA.

The acquisition helped it to defend its position as the largest private-sector bank against Itaú, its nearest rival.

It completed the month on January 28 by taking more than R$7bn in funds under management from US bank JP Morgan.

"The Lula government is putting its more liberal talk into practice and the banks like it," says Erivelto Rodrigo of Austin Asis, a Sa~o Paulo firm of banking analysts. "They're back in the market to buy scale."

Consolidation of the sector started in the mid-1990s, but the pace of change slowed last year. There was fear among investors, provoked by Lula's consistent lead in opinion polls before October's general elections, that a PT government might indulge in irresponsible spending and provoke a default on government debt.

So far, however, the PT seems committed to even more conservative economic policies than the previous centrist administration of president Fernando Henrique Cardoso.

Its proposals for a long-awaited overhaul of pensions, for example, go further than the reforms it obstructed in opposition.

Last month, the central bank raised its basic interest rate from 25 per cent to 25.5 per cent to combat the threat of inflation - a policy that the PT was calling disastrous as recently as December.

Surprised by the new government's orthodoxy, analysts have rushed to revise forecasts. Bear Stearns, a New York brokerage, upset many in Brazil last year by saying the country was "on the path to default". It now expects no credit event (default or restructuring) during 2003. Jason Mollin, Brazilian banking analyst, has upgraded Bradesco, along with Itaú and Unibanco, the other two big private-sector banks.

"The outlook is clear," he says. "Interest rates will remain high and that will enable banks to continue to achieve strong margins."

Mr Mollin expects Bradesco to report fourth-quarter profits of R$509m, up from R$420m in the third quarter, but down from R$610m a year earlier.

Sluggish growth, caused by currency devaluation and the general uncertainty, accounts for the year-on-year fall; growing optimism after the election, as the new government sets out its stall, accounts for the late surge.

Banks will continue to make much of their earnings this year from high returns on government debt. At the end of September 2002, exposure to government securities among the leading three private-sector banks was equal to 2.2 times shareholders' equity.

But the sector also faces restraints on growth in 2003. Interest rate spreads - the difference between borrowing and lending rates - remain among the highest in the world. While high spreads create big returns, they are also a brake on growth of lending and of the wider economy.

Among other things, a reduction in spreads requires a fall in delinquency rates - currently as high as 15 per cent. To achieve this, bankers hope the government will make progress on reforming bankruptcy laws that make foreclosure almost impossible.

Despite such restraints, optimism surrounding the new government has revitalised the sector.

"Bradesco and the other banks will certainly want to make more acquisitions," says Bruno Pereira, banking analyst at UBS Warburg in Rio de Janeiro. "The problem will be finding sellers."

One obvious target is Sudameris, owned by Intesa of Italy. Itaú was expected to buy it, but talks broke down after 11 months in November, when Itaú instead snapped up local bank BBA.

Unibanco could be next to make a bid. It was in talks to buy BBVA's operation when Bradesco made a bigger offer in December, in what was seen as a reaction to Itaú's purchase of BBA.

Unibanco seemed to have lost Sudameris to Itaú in similar circumstances a year earlier.

With foreign banks reducing their exposure to Brazil during the past year, there has been speculation that ABN Amro, the Dutch bank, could be next to leave.

However, Brazil still offers the prospect of much faster growth than developed markets. BBVA, in selling out, took a 4.5 per cent stake in Bradesco and a seat on its board. The foreigners could yet make a comeback.

www.puertoricowow.com Sunday, February 2nd, 2003.  

RIO DE JANEIRO, Brazil (AP) - A possible U.S. attack on Iraq could choke off a moderate recovery of South America's biggest economy, analysts said Sunday.

High petroleum prices on international markets that led to several gasoline price hikes in Brazil in recent months have already contributed to an acceleration of Brazil's inflation rate from 5.6 percent in September to 12.5 percent in December, according to the official statistics institute.

"The longer the current impasse on a possible war continues, with a consequence of even higher oil prices, the greater the damage for Brazil's economy," Hugo Penteado, chief economist at ABN Amro in Sao Paulo, told The Associated Press over the telephone.

To reign in inflation, Brazil's central bank in January hiked benchmark interest rates to 25.5 percent from 25 percent, slowing economic growth. Yet, Brazil's economy could still expand 1.5 percent this year, if a quick decision on whether to attack Iraq would be made, Penteado added. If there is a short war or with a peaceful solution, oil prices should stabilize little later, and the effect on Brazil's economy would be moderate.

But in the case of a conflict lasting four months or more, Brazil's economy could suffer both from higher oil prices pressuring inflation and from a drying up of investment flows to emerging economies due to a slowdown or recession in the U.S. economy, Penteado said. In that case, economic growth in Brazil could be close to zero, he added.

The current atmosphere of uncertainty about a war, has also harmed the value of Brazil's currency, the real, making imports more expensive, which again pressures consumer prices.

After Brazil's new President Luiz Inacio Lula da Silva took over on Jan. 1 and started to signal a continuation of moderate economic policies, the real initially gained ground, strengthening to 3.33 to the dollar by mid-January. But as war fears heightened, the real fell back again, closing at 3.515 to the dollar on Friday.

"The exchange rate stability depends on whether a U.S.-Iraq war will be quick (or not)," said Odair Abate, chief economist at Lloyds Bank in Sao Paulo.

www.brazzil.com Brazzil Cinema February 2003

As if from an Asian swell there has been a rising tide of Brazilian cinema masterpieces. Every month, Brazil has seen a steady flow of high-level cinematic creation. And every semester has ushered in a masterpiece.

Norman Madarasz

Blame only your curiosity if you've failed to notice it. Over the past ten years the eyes of creative filmmakers and film theorists alike have been set on Central and East-Asia. Perspective lines have focused right. East-Asian cinema—in Japan, China, Hong-Kong and Taiwan foremost—has been challenging Western conceptions of beauty and narrative form. It has won over audiences of cinemaphiles the world over—wherever the infrastructure to project foreign films has not been exterminated. On that issue, the American-Hollywood conglomerates, who spread their management doctrines to the film theaters, have banked their money and contract signatures to decide on what films you get to see. And whenever they can help it, those films aren't from abroad.

Takashi "Beat" Kitano, Wong Kar-Wai, Hsiao-Hsien Hou, and John Woo pre-Hollywood flight, are just some of the director names worth memorizing. Failing which, you might miss a golden opportunity at capturing artists chiseling at the cutting-edge marble of the seventh art. Even more than representing their respective national artistic renaissances, these filmmakers participate in the universal category of `auteur cinema'.

The Asian tigers may have refined art just as they renewed collective capitalism. Yet nothing compares with the outstanding production of Iranian cinema. No other country over the past ten years has contributed so prolifically to retracing the boundaries of the audiovisual art. No other culture has challenged the dictates of the post-modern American medley, welding consumerized business principles to artistic creation, as has the land of Attar and Hedayat.

A Camera in the Passenger's Seat

Many Westerners are dead-set convinced of the repressive nature of Iranian society in the aftermath of the Shiite revolution. But how do you equate the following situation? In the U. S., the self-declared bastion of free speech and art, the majority of film viewers are deprived of exposure to the world's greatest films. They are force-fed a monopolistic potpourri of that ol' ultraviolence, voyeuristic nudity and fantasy representation to such a degree that Hollywood long ago became a synonym of an insult to intelligence. Whereas in Iran you may find an astonishing depiction of a millenary civilization, whose past contributions to the arts and sciences were left unexceeded even by Rome. This is a culture bursting into high-tech modernity, although one that refuses to merely be co-opted into the Western system of representation and value.

American cinema no longer has anything to teach the Iranians. Not only are we the ones who have all to learn from them, it's learning to learn from them which has become our work. Our incessant exposure to insipid commercial products has warped our minds. The beats that pound in our hearts echo to a war cry. This is why seeking out the films of the contemporary Iranian masters is a duty not only to art, but to thought.

Islamist Iran never put the great filmmakers Abbas Kiarostami or Mohsen Makhmalbaf in jail. Yet Makmalbaf was tortured at the hands of the Shah's U. S.-trained and funded secret police. As for Kiarostami, he had to await an invitation from freedom's bastion to be denied the right to speak. Last summer he was refused entry into the U. S. as he planned to attend an homage to his life's work, organized by Harvard University no less.

As for the timeliness of Makhmalbaf's film Kandahar and publication of his film journal, they have given us more information and wisdom on the plight of Afghan society than the hundreds of hours of ideological soup produced by CNN and its cronies. If that wasn't enough, he has brought up one of the shining lights of young Iranian cinema, his own daughter, Samira, already the director of two critically acclaimed features.

For just cause the filmworks of Kiarostami and Makhmalbaf, among several others', whispers in the same breath as 1940's Italian Neo-Realism. Their filming strategy allows the real to supervene as it settles into artistic form, emerging autonomously from the human agents who set about its creation. Art matched up fully with the real in the film Kandahar, its release coinciding with the American bombing of Afghanistan. Form spoke transparently to those intent on gazing.

As a real living object, Makhmalbaf's work took an even more ominous turn. It appeared that Tabid Sahib, playing the medical doctor in Kandahar, was living out a film within the film. An American ex-pat at other times known as David Belfield, he is allegedly involved with the assassination of an ancien-regime Iranian diplomat in the late seventies. Upon conversion to Islam, he took the name of Daoud Salah Addine and escaped to Iran. The nom-de-plume of Hassan Tantai launched his acting career. Spot the fiction, if you can.

In a statement issued by Avatar films and published in The Guardian in January 2002, Makhmalbaf claimed to know nothing of the controversy. "I have made more than 20 feature films. I have always chosen my actors from crowded streets and barren desserts. I never ask those who act in my films what they have done before, nor do I follow what they do after I finish shooting my film. Kandahar is no exception."

As for whether Makhmalbaf would have still hired him had he known of the actor's involvement in a political murderer, the director stood tall. Governments tend to pardon political crimes when committed against injustice, why would the filmmaker act the moralist? A neo-realist film aesthetic and methodology draw out the moral norms. Makhmalbaf avowed wanting to make "a film with him about the murder that he had committed, in order to explore why it is that in the civilized and opulent United States, a black man commits a political assassination and then escapes to a country like Iran, which has a tense relationship with the United States. In fact it has just occurred to me that if I were to see him I will make that film." As it also dawned on him that, while Belfield is a marked man internationally, the filmmaker's own torturers live comfortably in the U. S., the land of the free.

Faced with the most fascinating moral issue to burst from the art world since Giuliani banned the Sensations exhibit, the American Academy of the Motion Picture Arts and Sciences decided to do the public's philosophical work. After winning Cannes' Ecumenical Jury prize in 2001, and a sure-set nominee for the Best Foreign Film category, Makhmalbaf's masterpiece was dropped from the roster. As it's a foreign film, the issue of censorship was never raised. That's because when it comes to foreign films, they're already earmarked for censorship by commercial and linguistic interests. So where does the globalized world begin?

Cinema Novo

A brand of exclusion stands equally for the rising tide of Brazilian cinema masterpieces. Those interested in Brazil's golden year of 2002 have had to search long and hard to find information on the country. In every article where the New York Times South America correspondent links the word leftist' to newly-elected president Lula da Silva and uses innuendo to twist the sense of anti-globalization former metalworker union leader', a thousand people loose out on the chance to see a Brazilian film.

Sure Brazil's World Cup victory was celebrated in the international press. And if you live in Europe or NYC you've probably had the opportunity of getting familiar with some of Brazil's recent musical creation—crafted either by exiles or natives. But it only takes a bat to flutter its wings for a glance to be sidelined.

When handsomely paid corresponds are the henchmen to belittle foreign cultures, how easy is it to keep an open mind and broaden it evermore toward their creations? As with Iran, how many are aware of the outstanding years of cinematic creation the country has lived?

The background to this creation is far different from the Cinema Novo movement of the 1960s, spearheaded by the late Glauber Rocha. It had given Brazilian art its international laurels in a century pierced with thorns. The country was then under a harsh military dictatorship. To quell the mounting social and political revolution of 1968, the generals increased the brutality. Glauber Rocha's films express the desperation of an entire generation seeing themselves severed from the international youth movement.

Sprouting minds were forced to keep living under a centralized hold on power that set the country back to the nineteenth century latifúndios in terms of political freedom. In reaction, these minds grew into radicals and revolutionaries, unleashing as they did the State's violence. Use of torture became commonplace. The rest of Latin America turned to authoritarian rule as its landed aristocracy crushed the will to reform and distribute wealth either in the fields or the cities. The early years of Brazil's military rule seem polite in comparison.

Nowadays Brazil is teaching the world a lesson in deliberative democracy. Its society is still gnawed severely by rampant inequality and the environmental catastrophe of desertification in the North-East states. Residents of its largest cities live in a continual state of preparation for violence wrought by a generation of youth with nothing to lose but a snort of glue or coke and padding their pockets with the green bill. Still, this country has historically ushered into power a government with a potential to introduce social change on a scale not seen since Chile's Salvador Allende assumed power by popular vote in 1970.

It's against this contemporary background that, ever since Walter Salles's surprise Oscar victory in the best Foreign Film for Central Station (Central do Brasil), every month has seen a steady flow of high-level cinematic creation. And every semester has ushered in a masterpiece.

Excuse me for flogging the poverty of American cinema to a pulp fiction. It's a lesson that so many Brazilians also have yet to wake up to and learn. With the exception of David Lynch, American cinema has become a medium organized only for the ideological dissemination of triumphalist abnegation. With every additional Gladiator thrown at a crowd starved for art, U. S. people continue in their simultaneously pathetic and arrogant self-portrait, forever in denial over the fact that their country is now nothing less than an Empire.

Caught in the web of the victim-hero complex, Americans suffer raw of being art-deprived by the commercial control on what gets to be shown and advertised in their Homeland secure. They prove to the world that vis-à-vis their State the population acts so often in complicity. For lack of political opposition, Americans underwrite the nightmare its current administration is forging around the world. The scenario there is of intensified poverty, spread of war and hatred, and a deregulated environment. Washington intellectuals seem unable to look at these outgrowths with clear eyes, were their spirits imbued with reading Chicago School economics and attending Georgetown University foreign policy lectures.

As Noble laureate Joseph Stiglitz put it in his last book, Globalization and its Discontents, the presence of the grand Logos of Channel, Calvin Klein, or even MacDonald's on the streets of the former socialist block states (Europe's new power centre, as Rumsfeld would have it) is anything but a sign of economic progress when ramping corruption aided and abetted by the IMF's fiscal ideology sends the masses tumbling into spiraling poverty.

Five Masterpieces

Brazilian intellectuals long ago understood that art was incorporation, cannibalism. Failure to ingest leads a nation's art to wilt from depression, if not explode in fury.

Nor has the country been spared the ravages of globalized shareholder capitalism. After all, its ruling financial clique has been among the IMF's star players in market deregulation. Still, as if on a bas-relief, Brazilian cinema has become political only in a broader sense. Were one to consider five bona fide cases, To the Left of the Father (Lavoura Arcaica), Hans Staden, Madame Satã, Behind the Sun (Abril Despedaçado), or the greatest Brazilian international success since Dona Flor and her Two Husbands, City of God (Cidade de Deus), all of these films are set in the past.

Lavoura Arcaica is Luiz Fernando Carvalho's mood piece of a young man's passion for his sister. Based on one of the foremost works in contemporary Brazilian literature, Raduan Nasser's eponymous novel, it tells the tale of a Lebanese immigrant family's life in the Pindorama, toward the interior of São Paulo State. The images are crafted by Walter Carvalho, the leading innovator among DoPs working in Brazil, or anywhere in the world at the moment.

At times distorting images of lust into anamorphic ecstasy, he reminds one of Alexander Sokurof's tonal inversions of Christ's passion. Caught amidst the humidity of hills and forests, in which secrecy and denial carve at the family patriarch's staunch insistence for the Arabic homeland values to prevail, Carvalho's camera inches by quoting Andrei Tarkovsky at the edge of Starker's void.

The film's opening draws the viewer into a rush channeled by a stunning soundtrack mainly performed by Brazil's premier experimental ensemble, Uakti, with sound switched into curdled milk bathing your face. Not before its 171 minutes stretch into the finale is the viewer released from penetration by the loss of unlivable desire.

Luiz Alberto Pereira's Hans Staden is based on the autobiographical account of a German explorer and adventurer of the same name, The True History of his Captivity, published in the 1557. It recounts the explorer's plight at the hands of a Tupinambá tribe on the coast of what was to become São Paulo state. The music composed by Marlui Miranda and Lelo Nazário, is performed by Uakti once again. Its effect is to make the film's language, spoken in Tupi, into a universal expression.

Staden had in fact learned the language, a trading lingua franca, after three years in Brazil. I can think of no film so intelligently designed on earlier Amerindian life that has been produced in either Canada or the U. S.. Hans Staden's nobility is acknowledged by the Tupis, the privilege of which for a prisoner is to be eaten. The Tupis grace the "Friesian" explorer with foremost hospitality. He is given a wife and allowed full participation in daily and spiritual life, as he awaits his fateful moment. When illness starts ravaging the tribe, Hans Staden not only steals his fate by fleeing to Europe. He witnesses the future devastation that disease would inflict on all American native nations without exception.

Madame Satã, directed by Karim Ainouz, is another film shot by Walter Carvalho, this time taking on Fassbinder's Querelle as deconstruction. Set in the hot Lapa district of Rio de Janeiro in the 1930s, swarming with malandro hustlers, it traces the origins of a transsexual who would become one of the great celebrities of Rio's Carnaval, dancing as a star with numerous samba schools. A masterpiece of acting, Madame Satã stars Lázaro Ramos, whose pathologic outbursts are only offset by his finesse, artistic grace and brooding sexuality.

Living from the gregarious gender-bending cabarets that brought Brazilian transsexuals their international fame, Satã becomes a hunted animal. He has slain an intoxicated gay-hater, who taunts him as if by a prohibitive messenger of God sent to keep the marginal deep within the Styx. The film is an aural experience. Music and chatter reverberate through the narrow alleys spreading under the bleach-white aqueduct that today hosts the roots samba revival. Through the heat and sweat, sex and murder, the hands of the narrative leave the cavaquinho and cuíca to pound drums built up multiplying five-hundred-fold as the film sambas to climax.

Walter Salles was involved in Brazil's recent tide of cinema from the start—as was his family. In 1996, brother Murilo Salles shot a stunning tale of regular teenage banditry, Como Nascem os Anjos (How Angels are Born). It may only be seen these days by subscribers of Brazil's fine cable channel, Canal Brasil, but this film anticipated the theme of kid-adults turned into psychopathic killers as if fed on a diet of rampant poverty. Their late-father, founder and former head of Unibanco, one of Brazil's major investment banks, was a patron of the arts for many decades. His lavish house, an architectural wonder in the heights over Gávea, is now open as an art and photo gallery, seating one of Rio's best small-scale cinemas. A music center has also recently been added to a research wing that had previously funded projects such as Claude Lévi-Strauss' Odyssean Saudade for Brazil.

Whereas the name of most art patrons are lost within the stone and paint and glass of which their funds release the creation, Salles passed his patronym onto cinema in the work of his sons. In Behind the Sun, Walter sets a story written by Albanian author Ismael Kandare in the legendary sertão backlands. It's a historical journey into the gang-related violence today tearing apart Brazil's urban fabric. The setting juts straight out from the initial chapters of Euclides da Cunhaa Rebellion in the Backlands (Os Sertões), but focuses on the plight of two clans condemned by the Law of Talion to seek retribution generation after murdered generation for the killing of past loved ones. Walter Carvalho is again behind the lenses, this time venturing alone into the infernal representational maelstrom as if following a caatinga plant's off-shooting stems.

Carvalho's astonishing work as director of photography should incite the reader to see his own documentary on blindness, featuring Hermeto Pascoal and Wim Wenders. Indeed, Brazil's documentary production has been second to none. This year has seen two outstanding features, Edifício Master and Ônibus 174, both set in contemporary Rio de Janeiro. The outstanding films discussed above may innovate on fiction, representation and narrative through historical palettes. But the documentary form—whether classically demarcated or integrated into fictional narratives—borrows present-time as its instrument for staining tears with blood.

As a blood banquet, City of God reaches paradisiacal heights of filmic expression. Dovetailing so many features composing this rising tide of cinema, its historical backtracking encapsulates what Brazil's current renaissance is all about. The samba and the funk, the poverty and rebellion, intensify the grind of living in two of the hemisphere's largest cities, need I say megalopolises. Much is still being written on the film and its social import, and more will surely be said. When I think of its hip action, and its sanguine humanism, I grow into a victim, subdued by the syncopation of legendary samba composer and cantor, Cartola.

His Psalm of Psalms beckons to art "Chora, disfarça e chora"—Weep, disguise and weep. And I do so neither because of what lies within the film's form, nor owing to what attacks from without the cinema's doors. No, I cry and clap and scream because art exceeds life here in neo-realist form, reaching into the pantheons of creation and eternity as if set afloat on Yemanja's barque gliding beyond the underworld.

Norman Madarasz is a Canadian philosopher based in Rio de Janeiro, Brazil. He welcomes comments at normanmadarasz2@hotmail.com

biz.yahoo.com Press Release Source: WorldTrade Executive, Inc. Friday January 31, 3:59 pm ET

CONCORD, Mass., Jan. 31 /PRNewswire/ -- In a live telephone conference on February 26, 2003, 11:00 am-12:30 pm (US EST), the principal architect of Brazil's inflation-targeting policy and two leading market analysts, will provide a candid assessment of the future of Brazil's economy for foreign investors.

The 90-minute conference, titled "Brazil's Economy in 2003: Stability and Growth, or the Start of a Downward Spiral?" features Sergio Werlang, senior Managing Director of Banco Itau in Sao Paulo and former Deputy Governor for Economic Policy of the Central Bank of Brazil. Mr. Werlang will be joined by two top-ranked economists and market analysts for Brazil--Arturo Porzecanski (ABN AMRO) and Ernest (Chip) Brown (Banco Santander Investment Securities.)

Brazil is at a critical juncture as newly elected president, Luiz Inacio Lula da Silva embarks on a four-year term. The president has recently emphasized fiscal austerity, structural reforms and an independent Central Bank, and is increasingly gaining the confidence of foreign lenders and investors. But the question remains whether President da Silva can succeed in balancing the country's social needs with fiscal responsibility and sound monetary policies, or whether Brazil will succumb to the same inflation, debt and stagnant growth problems so prevalent in the Latin American region.

• Some of the issues the speakers will address:
• Reconciling campaign promises and the need for fiscal reforms
• The outlook for the real, foreign exchange, inflation and GDP growth in

2003 and beyond

• Prospects for stability in financial markets
• Changes in Brazil's approach to foreign investment
• Vulnerability of the Brazilian economy to outside shocks, including a conflict in Iraq
• Access of companies in Brazil to international capital markets and foreign lines of credit

Following a 20-minute presentation by each panelist, listeners will have an opportunity to ask individualized questions.

Participants can join the discussion from their own offices via a toll- free number. Registration is $295 per connection site, with no limit on the number of participants at each site, through February 18. After February 18 the fee is $345. Audiocassettes of the conference will also be available. More information can be found at www.wtexec.com/conferenceinfo.html, or by calling 978 287-0301.

CONTACT:
 Kathy Rosenblum
 WorldTrade Executive, Inc.
 2250 Main St., Concord, MA 01742
 Phone: 978-287-0301
 Fax: 978-287-0302
 Email: krosenblum@wtexec.com
 Web site: www.wtexec.com

www.forbes.com Reuters, 01.31.03, 3:43 PM ET By Nicholas Winning

SAO PAULO, Brazil, Jan 31 (Reuters) - Brazil's top private banks are likely to post firm fourth quarter profits as high interest rates and trading gains help offset sluggish credit growth, although provisions could throw up some surprises. Analysts say the recovery in confidence in Brazilian assets since the election of leftist Luiz Inacio Lula da Silva in October should help the balance sheets, while a 7 percentage point hike in the Central Bank's main interest rates over the period would support margins. "While loan growth should remain stagnant and provisioning levels high, the Brazilian banks should nonetheless post strong profitability in 4Q 02 given high net interest margins resulting from high interest rates and solid trading gains," Jason Mollin, a banking analyst at Bear Stearns said in a note. Itau <ITAU4.SA>(nyse: ITU - news - people), Brazil's second-largest private bank, is likely to post the highest profit again, beating market leader Bradesco <BBDC4.SA>(nyse: ITU - news - people) and smaller Unibanco <UBBR4.SA> (nyse: ITU - news - people). Itau usually accounts for acquisitions on its balance sheet in one go, but analysts feel it may want to try to split up the $922 million acquisition of private banking specialist BBA-Creditanstalt SA in November because of its size. There may also be a surprise one-time gain from cash it had stashed away over time to buy Banque Sudameris' Brazilian unit from Italy's IntesaBci <BIN.MI> before the deal fell through. "Itau said the provision it made for Sudameris may be reversed in the fourth quarter -- about 500 million reais ($141 million)," said Rafael Quintanilha, a banking analyst at BES Securities. Itau should post net profit in the region of 591 million reais, according to an average of 5 analyst forecasts. That is below the 639 million reais it made in the previous quarter, but higher than the 234 it made in the fourth quarter of 2001 when it bought a state bank. The results are due on March 11. PROVISION COULD HOLD SURPRISES Brazilian banks stashed away huge trading gains from the sharp depreciation of Brazil's currency, the real , in previous quarters and put them aside to shield against any sudden future currency losses or debt nonpayment. Brazil's currency firmed slightly in the fourth quarter, but still lost 35 percent of its dollar value over 2002 thanks to a slowing economy at home and abroad and investors' worries about the economic policies of the new left-wing government. But the millions of reais the banks have put aside, or provisioned, in the past make forecasting results difficult. "The banks have so many reserves on the balance sheet that they can unwind into profits as they see fit," said one banking specialist who preferred not to be named. But some said the banks erred on the side of caution and will not ease out provisions until this year. "In the third quarter the banks made very big provisions ... and that should be repeated in December," said Erivelto Rogrigues, a director of Austin Assis consultants. "This year I believe that the banks should reduce the provisions because I don't think the economy will be as volatile and turbulent as it was in 2002." Bradesco, which posts results first thing on Monday, is seen posting a net fourth quarter profit of 511 million reais, based on an average of five analyst predictions. That beats the 420 million reais it made in the third quarter but loses out to the 610 million reais it made in 2001. "Bradesco has built up reserves through foreign exchange gains in the third quarter and could reverse part of those to boost earnings," Bruno Pereira, a banking analyst at UBS Warburg said in a note. "Movements in excess reserves could be an important driver." Brazil's No.3 private, Uniao de Bancos Brasileiros (Unibanco), is expected to post a fourth quarter net profit of 255 million reais on February 13, just short of the 269 million it posted in the previous quarter but above the 241 million reais it made in the year-earlier period. ($1 = 3.52 reais)