Restructuring Brazil’s national financial system

Restructuring Brazil’s national financial system

This paper examines the main institutional reforms that had a major impact in terms of building a robust (but not flawless) domestic financial system in Brazil after 1994, when the high inflation period came to an end. Its aim is to identify the most important policy measures that were taken as well as the economic and political motivations that supported the decision-making process.

The paper points out some links to other spheres of stabilisation, such as macroeconomic and fiscal ones, which are the main themes of other papers in the IRIBA project.

The paper makes two main conclusions. The first is that the reforms set after 1994 to stabilise the domestic financial system in Brazil may be regarded as a model which can provide lessons for African countries in terms of developing local financial markets and institutions.

Those lessons, however, have to take in to consideration that the Brazilian experience was a consequence of fifteen years of high inflation, and unstable growth and no access to voluntary international Markets and that economic, political and social conditions of African countries nowadays are not similar to the Brazilian dilemmas of the 1990s.

Secondly, the success of these reforms was heavily dependent on the role of public institutions, which had the political support from the government to implement the transformations in financial markets. Those reforms were mainly based on the experience accumulated along the crisis management of the 1980s by the staff of those governmental organisations and, to a lesser extent, on the lessons from other countries. The implementation of those reforms was very pragmatic and didn’t follow any master plan or pre-established timetable.

 

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