3rd UPDATE: Citi Asked Brazil To Buy Stake In Bank--Energy Min
(Adds further comments from Lobao, in the third and 10th paragraphs.)
By Fabio Alves
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Brazilian Energy Minister Edison Lobao said Tuesday
that Citigroup Inc. (C) earlier this year asked the Brazilian government to buy
a stake in it as the bank was seeking a cash infusion.
The government reviewed the offer, he said, but declined to take a stake.
Lobao admitted that he wasn't involved in the negotiations nor had he the
exact details of the possible deal. President Luiz Inacio Lula da Silva told him
that, during "the peak of the financial crisis that Brazil almost bought a
stake" in Citigroup, Lobao said in the middle of a presentation of his country's
planned investment in its energy sector.
"Citigroup offered the Brazilian government the chance to buy stock during the
financial crisis," Lobao told a gathering at the Brazilian American Chamber of
Commerce. "The bank was in a lot of difficulties, but the Brazilian government
concluded that the country had to emerge from the financial crisis first."
Citigroup had no immediate comment on the energy minister's remarks. The
Brazilian government also declined to comment further.
The proposal from the banking giant is another sign of Brazil's status as one
of the developing countries that has weathered the financial crisis better than
developed nations. The country has won investment-grade ratings from all three
major rating agencies. It also recently agreed to purchase up to $10 billion in
bonds from the International Monetary Fund, after decades of being a debtor to
the IMF.
Lobao noted that Brazil exited the recession faster than expected, with the
government forecasting that growth will exceed 4.5% in 2010.
Lobao said talks with Citigroup occurred "probably in the beginning of this
year" and took place in the U.S.
Lobao declined to give details on the size of the stake Brazil was offered. He
said he assumed terms of the deal would have been similar to those agreed with
other governments, including the U.S.
"I don't know exactly what the price was," he said, adding that it wouldn't be
more than what the U.S. government had paid for its stake in Citigroup. "Thanks
to our good Lord, it wouldn't create major problems for us. We could pay that
price for the purchase of a third of Citigroup."
Over the course of the financial crisis, Citi has sold stakes to several large
state-owned foreign investors, including the Abu Dhabi Investment Authority, the
Government of Singapore Investment Corporation Pte. Ltd., and the Kuwait
Investment Authority, in an effort to improve its capital position.
At the height of the financial crisis last autumn, the U.S. government stepped
in to bail out the banking sector, including Citi. The U.S. now holds a roughly
34% stake in the bank after injecting some $55 billion.
Lobao added that, in hindsight, Brazil made a mistake by not buying a piece of
the bank. We "missed a good opportunity to make big profits, besides the great
prestige that it would [have] conferred on Brazil."
The deal was analyzed by the heads of the central bank and the Finance
Ministry as well as the President Luiz Inacio Lula da Silva, Lobao said.
-By Fabio Alves, Dow Jones Newswires; 212-416-2204; fabio.alves@dowjones.com
(Matthias Rieker in New York and Tom Murphy in Sao Paolo contributed to this
article.)
(END) Dow Jones Newswires
11-24-091611ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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