| SAO PAULO, July 28
SAO PAULO, July 28 Spain's Banco Santander SA
finds itself in an unwanted spotlight in Brazil after
its local subsidiary irked the government by circulating a
client note saying that the re-election of President Dilma
Rousseff would likely push asset prices lower.
In a monthly column to wealthy clients entitled "You and
Your Money," Banco Santander Brasil SA said a drop
in Rousseff's popularity had helped spark a recent rally in the
Brazilian stock market - a common view among economists and
investors who believe the government's heavy-handed policies
have contributed to Brazil's current economic slump.
The note then went on to say that the market rally could
fizzle if the president's popularity stabilizes or rebounds in
opinion polls ahead of October's election, an assertion that
angered government officials and members of the ruling Workers'
"The real would weaken, long-term interest rate futures
would rise again and the Bovespa index would fall, reversing
some of the recent gains," read the column, which was mailed
with monthly statements to about 54,000 account holders.
Hours after the report was made public on a local website,
the president of the leftist Workers' Party accused Santander of
"electoral terrorism," sparking a media frenzy that dominated
the political pages of Brazilian newspapers over the weekend.
Asked about the episode on Monday in an online interview
with Brazilian media, Rousseff had harsh words for the bank.
"It's unfortunate and unacceptable what Santander did," she
said, adding that she plans to discuss the matter with the bank.
Santander Brasil is scrambling to contain the damage. On
Friday, it issued a public apology for using language that it
acknowledged could be construed as politically biased.
On Sunday, the bank's global chairman weighed in. Speaking
to reporters in Rio de Janeiro, Emilio Botin said the report
reflected the views of an individual analyst, not the
institution. He also reiterated Santander's commitment to
Brazil, a key market that accounts for a fifth of the bank's
"We continue to invest and to encourage others to invest in
Brazil," Botin said, adding that the bank would take the
"necessary measures" to ensure that a similar incident does not
Santander Brasil declined to disclose whether it was
conducting an internal investigation into the matter or if
people were fired or could be fired over the incident.
The Santander incident sent a chill through Brazilian
financial markets, prompting some analysts and economists to say
they would be extra careful with their research notes to avoid
The episode highlights escalating tension around Brazil's
presidential race, which now looks too close to call after two
recent opinion polls showed opposition challenger Aecio Neves
neck and neck with Rousseff in a second-round runoff vote.
Santander Brasil, which had 494.6 billion reais ($222
billion) in assets at the end of March, is the third-largest
private-sector bank and the largest foreign lender in Brazil.
($1 = 2.22 reais)
(Additional reporting by Silvio Cascione and Jeferson Ribeiro
and Alonso Soto in Brasilia; Editing by Todd Benson and Cynthia