Sardenberg defends "poor" Santander analyst.

247 - Globo Network economics commentator Carlos Alberto Sardenberg defended the "independence" of the banking sector on Thursday, March 31st, while commenting on the Santander case. He described the government's reaction to the report released by the Spanish institution, warning clients about the risk of President Dilma Rousseff being re-elected, as "bad." "The banking sector must be independent. It should be that way in a serious market," he stated. Sardenberg added: "And it's evident that politics is related to economics." Read below:

Money and information 
Any analyst would say that a second term for President Dilma would not be good for the average investor.

Journalists, at least here at Globo, cannot recommend financial investments. Journalists and economic commentators cannot even own shares in any company, due to ethics and practice. A professional may be impartial, but appearances matter here. The public has every right to be suspicious of a comment if they know that a commentator is buying or selling shares in a state-owned company.

It's the same thing with food journalists. They can't accept a free meal and then comment on that restaurant.

There has been a lot of fraud and misconduct among journalists, both here and abroad. How can we prevent it? One possibility would be to impose strict legal regulations on the work of journalists—a terrible solution because it would inevitably lead to a severe restriction on press freedom. The fundamental principle is that the press must be free. Whether it is good or not depends on society, on the public that will consume this or that publication.

Therefore, reputable media outlets adopt codes of ethics. Internal control is best. Over time, the public recognizes the character of the outlet. They distinguish between the biased and the unbiased, between the opportunistic and the serious, between those who want to make money at any cost and those who want to make money with serious journalism.

Yes, of course, serious journalism makes mistakes quite often. But it returns to the subject, acknowledges it, and redoes it. There had to be some advantage to having to produce news every day...

In short, journalists can cover any topic, they can say that a company is doing well — and show the data — or that a sector is doing poorly, but they shouldn't say "buy this," "sell your house and invest in interest," things like that.

The situation is different for investment analysts. A bank client needs specific guidance.

Investment analyst is a profession. "Broker" is too. To assemble a group of investors and form, for example, a stock club, the individual needs a license and authorization from the Securities and Exchange Commission. The same applies to recommending investments.

Regulation, both here and abroad, also results from mistakes and wrongdoings committed over time. The most common practice was—and can still be—for banks to recommend investments that will be bad for the investor and good for the bank. Imagine that the bank, in its Treasury department, bought Petrobras shares and wants to get rid of them. If it goes around saying that the state-owned company's shares will rise and, to help a little, puts a "front man" to buy batches of these shares and force an initial appreciation, that's a major rip-off.

There are laws and regulations in place to try and manage the potential conflict of interest between the client/investor, the bank, and the bank owner.

Therefore, the banking sector that interacts with clients, informing and suggesting investments, must be independent. This is how it should be in a serious market. Brazil has improved in this aspect, with regulations and practices. One of them is broad transparency: investment analysts publicly release their reports every day. They recommend buying or selling stocks, and indicate target prices. The reports go to clients and are frequently distributed to the press, as do national and international consulting firms.

Well, it's clear that politics is related to economics. The policies of Dilma's government caused a huge devaluation of Petrobras shares, the most striking example. When questioned about this, the president has argued that state-owned companies don't work for speculators—thus lumping together large speculators, workers who invested their FGTS (Brazilian severance fund) in the state-owned company, and the average investor who simply wanted to accumulate some savings.

All things considered, any analyst would say that a second term for President Dilma would not be good for the average investor. Even admitting that the current management of Petrobras may bring long-term results, the fact is that, at the moment, the company does not prioritize profit and the interests of minority investors as its central objective.

That's what the poor analyst from Santander said. And that's what everyone else has been saying, repeating, all the other analysts for a long time. Normal.

The government's reaction was poor, choosing an easy target to claim itself as a victim of terrorism instead of challenging the data. This threatened freedom of information.

Even worse was the reaction from the bank's management, who apologized to the government and fired the analyst. They said he/she had done something wrong. Does this mean the right thing to do is buy stocks when Dilma's chances increase? Were the bank's clients misled in the last reports, or are they being misled now?

And the bank's owner, Dom Emilio Botin, defended his business. The government is a regulator and a very good client. One order, and governments, municipalities, and public entities can close accounts with Santander. In short: the attack on freedom of information and of doing business prevailed; and the banker's interest.