Supreme court lets Itau keep Parana contract

Brazil's federal supreme court has ruled to let bank Itau (NYSE: ITU) keep its contract as sole financial agent for Parana state government, local press reported. Parana governor Roberto Requiao had pushed through a law in the state legislature last year that called for ending Itau's contract - which runs until 2010 - and instead putting the contract up for competitive tender early next year. Itau won the government contract in 2000 when it acquired Parana state bank Banestado in a privatization. Itau was supposed to be the Parana government's sole financial agent until 2005 but at the end of last year, outgoing governor Jayme Lerner extended the contract until 2010. Requiao is now planning to send a new bill to the state legislature to prevent the extension of Itau's contract until 2010, according to local press reports. The Parana government is depositing 756mn reais (US$258mn) monthly at Itau, of which 300mn reais is used to pay the state's 250,000 active and retired employees. Government accounts in the states of Bahia and Pernambuco will come up for auction in June and November next year as their contracts with local bank Bradesco (NYSE: BBD) and the Brazilian unit of ABN Amro (NYSE: ABN) expire. Federal bank Banco do Brasil has said it will compete for the contracts in Bahia and Pernambuco and that it would also have been interested in the Parana contract.