Developing countries’ changing nature of financial integration and new forms of external vulnerability: the Brazilian experience

This article analyses the effect of changes in international financial markets on the debt dynamics in sub-Saharan Africa in recent years. A key development is the rise of the private sector as both a lender and a borrower in African debt markets, a process that is associated with the growing integration of the region into global financial markets. The article argues that the Debt Sustainability Framework of the International Monetary Fund and World Bank has taken some steps to account for this growth of private sector, crossborder debt, but such steps still fall short of what is needed. A full appreciation of the importance of private debt implies, first, that debt sustainability in sub-Saharan Africa be understood in the context of countries' integration in global financial markets and the global liquidity cycles that characterize those markets and, second, that the interplay between private and public debt be monitored in order to provide a fuller picture of the impact of private sector debt on fiscal sustainability.The authors wish to thank the anonymous reviewers for their helpful feedback and Andreas Antoniades, Stephanie Blankenburg, Penelope Hawkins and Ewa Karwowski for comments on an earlier version. We also thank UNCTAD for financing earlier research on this subject. All errors are the authors' own.

Section: Debt Sustainability and Financial Integrationmentioning

confidence: 99%

Section: Global Liquidity and Public And Private Debt Interdependencementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Global Liquidity, the Private Sector and Debt Sustainability in Sub‐Saharan Africa

Bonizzi¹,

Laskaridis²,

Toporowski³

2019

“…The distinction made in this section between ‘traditional’ and ‘new’ forms of financial vulnerability is based on the emerging research agenda pioneered by Annina Kaltenbrunner and Juan Painceira (e.g. , ; also Akyüz, ). Drawing upon Minskian and post‐Keynesian economics, the main insight is that pre‐ and post‐crisis booms in money‐capital flows to developing countries accelerated the build‐up of forms of financial vulnerability which are different — but no less problematic — than those which repeatedly led to crises throughout the 1990s.…”

Section: Foreign Exchange Derivatives As a ‘New’ Form Of Vulnerabilitymentioning

confidence: 99%

Taming Foreign Exchange Derivatives Markets? Speculative Finance and Class Relations in Brazil

Alami¹

2019

This article provides a critical interrogation of the Brazilian tax on foreign exchange derivatives deployed between 2011 and 2013. It analyses the drivers of the policy-making process that led to implementation of the measure, locates it within the broader policy response regarding the management of cross-border capital flows and speculative finance, and assesses its political economy significance in light of class dynamics. The author makes three arguments. First, this innovative policy tool must be interpreted in terms of the emergence of a specific form of state power allowing for the continuation of finance-led strategies of accumulation, while mitigating some of their worst consequences. Second, this form of state power internalizes the subordinate positionality of Brazil in the global financial and monetary system. Third, while financialization processes have eroded the efficiency of a number of policy tools, this policy experiment demonstrates the possibility of regulating complex financial markets, provided that appropriate resources are dedicated to the task, and that there is the political will to do so. The article concludes by discussing theoretical implications, for how to theorize state and financialization, as well as political implications.I would like to thank my interviewees for their openness and assistance. Thanks are also due to two anonymous reviewers for helpful comments on earlier drafts of this article. The usual disclaimers apply. Development and Change 50(5): 1310-1341.

“…First, although increasingly denominated in domestic currency, which reduces DEEs' 'original sin' (see e.g. Eichengreen et al, 2003), capital flows to DEEs have remained very volatile and have been increasingly affected by the stance of US monetary policy and global risk perception (see Ahmed and Zlate, 2013;Kaltenbrunner and Painceira, 2015, among many others). This is due to the growing presence of foreign banks and other foreign non-banking investors in DEE financial markets.…”

Section: The Implications Of Monetary and Financial Subordinationmentioning

confidence: 99%

The International Dimension of Financialization in Developing and Emerging Economies

Bortz¹,

Kaltenbrunner²

2017

Self Cite

113

This contribution discusses the international aspect of financialization in developing and emerging economies (DEEs). It argues that international financialization is more than just an increase in cross‐border capital flows but entails distinct qualitative changes in the way economic agents are integrated into international financial markets. Moreover, in line with the emerging literature on subordinated financialization, the article shows how these changes have been shaped by, and have themselves exacerbated, the subordinated position of DEEs in the international economic and financial system and hence have contributed to uneven international development. Based on an empirical discussion of recent changes in DEEs’ international financial integration, the article concludes with some concrete policy proposals on how to confront these international aspects of financialization.