IDEAS home Printed from
   My bibliography  Save this paper

Financial Development, Growth and Equity in Brazil


  • Armando Castelar
  • Regis Bonelli o


Financial markets help to foster growth and productivity through their role inmobilizing savings to finance investment and production, selecting and monitoringinvestment projects, diversifying risks, and allowing investment and production to becarried out in the most productive scale and time frame. This paper examines the linksbetween financial development, growth and equity. The focus is on the Brazilian case,but we also aim at contributing to a broader discussion on the role of financial marketsin fostering economic development in Latin America. The analysis discusses: a) Brazil?srecent growth record, which resembles Latin America?s average regarding pace andsources of growth; b) recent changes in financial intermediation in the region, stressingthe role of the public sector in absorbing private savings; c) the interface betweengrowth and finance; d) the issue of access to financial services; and e) the impedimentsto financial deepening and inclusion drawn from the Brazilian experience.Among its conclusions we highlight the relatively small contribution the Brazilianfinancial system has had towards promoting growth and equity in the followingsequence: a) the incomplete macroeconomic adjustment of the economy, which lead tohigh interest rates, market volatility, and a preference of savers for liquid, short-termfinancial investments; b) the high tax burden and the associated high degree ofinformality and fiddling with company accounts, which lower the quality of theinformation disclosed to financial institutions and capital markets; c) the central role ofthe state in mobilizing and allocating savings, largely an inheritance of the pre-1990sdevelopment model, which dampens the impact of financial intermediation on capitalproductivity; and d ) the low protection of minority shareholders and especiallycreditors against expropriation by the state and private parties create a highly uncertainand risky environment that raises the cost of capital, discourages financialintermediation and raises the preference for short-term and liquid financial assets.

Suggested Citation

  • Armando Castelar & Regis Bonelli o, 2005. "Financial Development, Growth and Equity in Brazil," Discussion Papers 1118, Instituto de Pesquisa Econômica Aplicada - IPEA.
  • Handle: RePEc:ipe:ipetds:1118

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Reint Gropp & John Karl Scholz & Michelle J. White, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 217-251.
    2. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    3. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," IDB Publications (Working Papers) 3338, Inter-American Development Bank.
    4. Demirguc-Kunt, Asli & Laeven, Luc & Levine, Ross, 2004. "Regulations, Market Structure, Institutions, and the Cost of Financial Intermediation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 593-622, June.
    5. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    6. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications 4303, Inter-American Development Bank, Research Department.
    7. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
    8. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    9. Tarsila Segalla Afanasieff & Priscilla Maria Villa Lhacer & Márcio I. Nakane, 2002. "The Determinants of Bank Interest Spread in Brazil," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 183-207, July-Dece.
    10. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
    11. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "Saving in Developing Countries: An Overview," World Bank Economic Review, World Bank Group, vol. 14(3), pages 393-414, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipe:ipetds:1118. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabio Schiavinatto). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.