After several years in the doldrums, Brazil's economy is likely to grow by 3%-4% this year and bankers expect a sharp increase demand for loans. Bradesco, Brazil's largest private-sector bank, expects the country's GDP to grow 3.5% in 2004 but forecasts demand for loans will grow much faster, by about 20%. Bradesco, like most other large Brazilian banks, issued debt on the international markets all last year to boost its lending capacity. Indeed, 2003 was the bank's busiest in the international bond markets ever, issuing $825 million-worth of bonds, nearly three times more than in 2002.
A large portion of that issuance comprised a single, $500 million subordinated debt issue, the largest of its kind ever launched by a Latin American bank. Subordinated debt counts as tier two capital, which enables banks to raise lending without endangering their capital ratios. Subordinated debt is also popular because...
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