Financialization against Industrialization: a regulationnist approach of the Brazilian Paradox

Abstract

The process of trade and financial liberalization has fundamental consequences on the development of Brazilian industry. The relatively rapid reconfiguration of the institutional form of insertion into the international regime, in a context of intensification of foreign competition and lack of consistent industrial policy has been the engine of significant changes in the structure of industry. At the end of the 1990s, a new mode of regulation emerged, based on a new accumulation regime as result of the structural changes observed. Several empirical studies have highlighted the occurrence of deindustrialization and Dutch disease caused by the strong appreciation and volatility of the exchange rate, while others, on the contrary, see the opportunity for modernization of plants from the lower prices of imported capital goods. This paper provides new empirical evidence on the chances of industrialization and Dutch disease, which marks the current debate on the effects of real exchange rate appreciation to the Brazilian economy. For its relevancy regarding the future of the industry in this country, our work also examines the recent evolution of the Brazilian growth in the context of the spread of the North-American crisis. This regime has been characterized by a strong dominance of financial accumulation ; it constraints on investment and consumption decisions, which would explains the sharp drop of the industrial production in late 2008, when the global financial markets were largely affected. Consequently, the prospects of Brazil’s macroeconomic performance depend crucially on the reactions of the current mode of regulation, and the regime of accumulation, to the challenges posed by the current stage of evolution of the global economy. By using the concept of financialization it is possible to achieve a better understanding of the relationship between industrial structure changes and financial liberalization.

Subordinate Financialization in Emerging Capitalist Economies

“…A form of "elite financialization" developed in those countries where domestic financial rates of returns -e.g. high interest rates to attract capital inflows -made it possible for wealthier sections of the population to find remunerative savings vehicles (Araújo et al, 2012;Becker et al, 2010). Nevertheless, given the small capacity of ECEs' financial markets as well as their subordination in the global financial system, a large share of this wealth has been invested into ACEs (Goda et al, 2017;Lysandrou, 2011).…”

Subordinated Financial Integration and Financialisation in Emerging Capitalist Economies: The Brazilian Experience

“…For Brazil, a growing literature shows the changing financial behaviour of large Brazilian NFCs, which have increased their holdings of financial assets (including those of cash), financial income and expenditures, and have substituted bank lending for market funding, mostly offshore on international financial centres and in foreign currency (Almeida et al, 2016, Araujo et al, 2012, BCB (Central Bank of Brazil), 2015b, Cintra and da Silva Filho, 2013, Bruno et al, 2011, Miranda et al, 2009. Another characteristic of financialisation in Brazil is the (speculative) operations by NFCs and banks on the liquid, local derivatives market (Farhi and Borghi, 2009, Prates and Farhi, 2009, Oliveira de and Novaes, 2007.…”

“…A small but growing literature documents similar changes in the financial practices and relations of economic agents in ECEs to those observed in CCEs (Demir, 2008, Demir, 2009, Ergüneş, 2012, Ertürk, 2003, Gabor, 2013, Painceira, 2008, Powell, 2013, Rethel, 2010, Bonizzi, 2013, Correa et al, 2012, Doucette and Seo, 2011, Karacimen, 2014, Levy-Orlik, 2012, FESSUD, 2013. Financialisation in Brazil has been analysed, among others, by Coutinho and Belluzzo (1998), Miranda et al (2009), Painceira (2011), Bruno et al (2011), Araujo et al (2012), andBin (2016). Few of these contributions though focus explic itly on the question of how financialisation in ECEs might differ from that in CCEs.…”

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

“…Both types of approaches highlight how the state actually plays an essential role — whether deliberately or not — in mediating financialization processes, either through directly becoming an actor in financial markets, or by lifting a series of regulations in the realm of money and finance that facilitate financialization . There is no doubt that both aspects have played a key role in the financialization of the Brazilian economy (Alami, ; Araújo et al., ; Kaltenbrunner and Painceira, ). But the policy tool examined in this article suggests another aspect: the Brazilian tax on FX derivatives was neither implemented to tame the constraint exerted by financialization processes, nor to seize the opportunity that they offered.…”