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

Abstract

This paper analyses the recent changes in financial practices and relations in emerging capitalis t economies (ECEs) using the example of Brazil. It argues that in ECEs these financ ia l transformations, akin to the financialisation phenomena observed in Core Capitalist Economies (CCEs), are fundamentally shaped by their subordinated integration into a financialised and structured world economy. To analyse this subordinated financialisation the paper draws on the framework of international currency hierarchies. It shows by means of two specific processes how the existence of a hierarchic international monetary system has changed the financial behaviour of domestic economic agents and with it the structure of the financial system. The first process highlights the phenomenon of reserve accumulation and the changing behaviour of domestic banks. The second points to ECEs' sustained external vulnerability and its impact on the operations of Brazilian non-financial corporations. The paper also shows that not only were these financ ia l transformation shaped by ECEs' subordinated financial integration, but it was these financialisation tendencies themselves which contributed to cementing existing hierarchies and further deepened existing asymmetries between ECEs and CCEs.

Dimensions and Determinants of Financialisation: Comparing OECD Countries since 1997

“…As discussed in section 2, research on emerging economies, in part based on Minskyan analyses, has argued that financialisation is often caused by the liberalisation of capital accounts allowing for unhindered inflows of financial capital, especially portfolio investment, from abroad (e.g. Arestis and Glickman, 2002;Kaltenbrunner and Painceira, 2018). Thus, we investigate to what extent financialisation positively correlates with financial inflows.…”

“…While much of the early debate within heterodox economics centred on non-financial firms, the change in their investment behaviour was clearly linked to a changing financial sector, set off by financial deregulation. Here, the rise of institutional investors (Clark, 2000;Toporowski, 2000;Langley, 2004) and more recently the growth of the shadow banking industry (Pozsar, 2008;Adrian and Shin, 2009;Pozsar et al, 2010;Kessler and Wilhelm, 2013;Nesvetailova, 2014) have been central themes. Since the 1980s the assets of institutional investors such as pension funds, commercial insurers and investment companies have increased dramatically, especially in the UK and US.…”

The 2014–15 Financial Crisis in Russia and the Foundations of Weak Monetary Power Autonomy in the International Political Economy

“…EMDs only have a subordinated status within the global financial architecture, making their economies and financial sectors dependent on powerful networks and actors in core capitalist economies (CCEs) and IFIs. 5 Using Brazil as a case study, Kaltenbrunner and Painceira (2018) look at the country from a perspective of financialisation in EMDs, demonstrating that EMDs' dependent integration into the global financial order defines developments in their domestic financial markets. It leads to increased vulnerability in the form of latent depreciation pressures and violent exchange rate movements.…”

“…It is widely accepted that the international monetary system is characterised by large asymmetries of power (Strange 1994, Helleiner 2006, Elson 2011, Andrade and Prates 2013, Vermeiren 2014, Cohen 2015, Gallagher 2015, Kaltenbrunner and Painceira 2018. Using the 2014-15 financial crisis in Russia as a case study, the paper explores the factors that impinge on the monetary power autonomy (MPA) of an emerging market and developing country (EMD).…”

The International Dimension of Financialization in Developing and Emerging Economies

“…A number of studies have highlighted the driving role of the international economy for financialization processes in DEEs (e.g. Kaltenbrunner and Painceira, ; Powell, ). In contrast to that literature, we focus on the distinctive international manifestations of financialization in DEEs.…”