Brazil: from Eliticized- to Mass-Based Financialization.

Abstract

While research on financialization, considered the latest stage of the development of capitalism, initially focused on industrialized countries, it has now expanded to include emerging markets. This article provides new insights into the current Brazilian case, while arguing also that Brazil was already grappling with a premature, eliticized process of financialization in the 1980s, however embryonic. From the 2000s on, there came a new wave of financialization. This time, however, it was mass-based, using social policy as collateral. The article first establishes a timeline for and taxonomy of how financialization has been deployed in Brazil. It then examines how policies aimed at promoting social inclusion have been diverted to that end. Finally, it presents regression analyses demonstrating a negative correlation between financialization and the provision of public goods and services, which has become increasingly privatized. It also finds a positive relationship between financialization and income and cash transfers, the latter serving as collateral for the former.

Brazil: Stock Markets and Corporate Credit Now Driving Financialization?

“…What followed was a rupture in the pattern of Brazil's growth, as well as in state intervention in the economy. By the same token, as stated by Lavinas et al (2019), "the banking and financial sector, consolidating itself as a hegemonic sector, guided the institutional transformations that led to the commercial and financial liberalization of the 1990s" (page 4).…”

“…It is worth recalling that over the 1980s, the inflation rate per year rose from 95.62% in 1981 to 1972.91% in 1989. In the year preceding the implementation of the Real Plan (1993), it reached 2477.15% (IBGE, Contas Nacionais, Historical Series). With the backing of a State burdened by debt in foreign currency and unable to rein in devaluation, the banking and financial sector during this period developed off the inflationary gains derived from the public debt in overnight operations (Lavinas et al, 2019). The returns were constantly updated by the mechanism of monetary indexation (adjusted by the national consumer price index).…”

Elephant limps, but jaguar stumbles: Unpacking the divergence of state capitalism in Brazil and India through theories of capitalist diversity

“…First, banking systems in both countries appear relatively stable, with a slightly growing market share for domestic (public) banks and a marginal role for foreign financial institutions and stock exchanges for investment finance (FSB, 2016(FSB, , 2017Tara and Dhamija, 2018). Second, the entry of investment funds in Brazil has not led to a profound change in corporate control or finance because most of them participate in the traditionally highly profitable treasury bond segment, feeding into the specific (state-led) trajectory of Brazilian financialization (Bin, 2016;Lavinas et al, 2019). In effect, most Brazilian firms cannot easily circumvent the limitations of the bank-based system (not least due to the retrenchment of BNDES as a major credit source) by tapping on external market-based credit.…”

Social Policy since Rousseff: Misrepresentation and Marginalization

“…Oreiro (2017) points out that the main factor in declining return rates was the drop in the profit margins of nonfinancial corporations, especially industry. At the same time, the stock of nonmonetary financial assets increased at an average annual rate of 7.9 percent between 2011 and 2014 (Lavinas, Araújo, and Bruno, 2019), showing that financialization had invaded the logic of the private sector, rescuing the losses of nonfinancial corporations.…”

“…The other side of mass financialization (Lavinas, Araújo, and Bruno, 2019) was access to consumer credit-unsecured credit with no strings attached regarding its use and approved almost instantaneously. Between 2003 and 2012, this credit line registered the highest growth rate (over 300 percent, while that of total wages only doubled).…”