Brazil Planning IPO For State-Run Digital Bank

Brazil’s government is planning to launch an initial public offering (IPO) for a new digital arm of Caixa Econômica Federal, according to a Reuters report on Tuesday (Oct. 20).

Brazil anticipates joining the Organization for Economic Cooperation and Development (OECD) before 2021 ends, Economy Minister Paulo Guedes said during a streaming event held by the Milken Institute, per Reuters. 

“We are about to join the OECD. We are fulfilling two-thirds of what the requirements are, and probably in one year we should be joining,” Guedes said. He emphasized advances in transparency, regulatory, anti-corruption and procurement protocols.

According to the report, U.S. Secretary of State Mike Pompeo said on Monday that Brazil has U.S. support in joining OECD. “We want this to happen as quickly as [it] can,” he said.

Guedes reaffirmed that the government’s economic reform agenda was rebounding after expending 10% of gross domestic product (GDP) in 2020 fighting the pandemic. One of the biggest expenditures included emergency funds provided to Brazil’s poorest citizens via Caixa Economica Federal.

“We digitized 64 million people. How much is a bank with 64 million people worth? Low-income people, but people that were (bank-registered) for the very first time, so they are going to be loyal for the rest of their lives,” Guedes said.

Brazil’s weaker currency is due to the country’s fiscal and monetary policy changes over the last 18 months, Guedes also said. He added that the government and the central bank were working on ways to lower that risk.

He reiterated Monday’s comments that the Brazilian economy will shrink about 4% this year,  less than anticipated.

Brazil’s open banking framework has been progressing slowly, partly due to lack of standardization. Innovations in payments-as-a-service (PaaS), however, have been quickly advancing in the country. FinTech developments are the biggest drivers of open banking in both Brazil and Latin America.