Financial stability in Brazil: after overcoming the crisis, banking faces the challenge of reforms.

LATIN AMERICA AND THE ATLANTIC SPACE - Apr 19, 2010

On 13 April, Enestor Dos Santos (BBVA Research Department) presented his paper: "Financial stability and the role of banking in Brazil." In his address, Dos Santos stressed that Brazil and its banks had successfully escaped the effects of the current global economic crisis.


On 13 April, Enestor Dos Santos (BBVA Research Department) presented his paper: "Financial stability and the role of banking in Brazil." In his address, Dos Santos stressed that Brazil and its banks had successfully escaped the effects of the current global economic crisis. According to the speaker, the two main reasons for this were, on one hand, the stability and maturity shown by the central bank when making decisions concerning maintaining the liquidity of the system and flexibility in bank loans and, on the other, the backing given to credit by the Brazilian banking system. Unlike previous crises, such as the ones in 1995 and 2001, the structural changes within the sector, together with the country’s macroeconomic stability, enabled Brazil to cope with the international economic situation. A responsible fiscal policy focused on favouring private consumption through public banking, low interest rates and inflation and a central bank committed to putting money into the system all helped the country to prevent the crisis from having greater impact. Compared to what happened in the past, this time the banks have emerged stronger, with improved prospects for expansion into other markets in the region. In conclusion, Dos Santos warned that while Brazil's prospects are very promising, reforms are needed to encourage the expansion of long-term credit (property) and to reduce the spread of banks that continue to generate high interest rates to the detriment of the cost of money.

Carles Murillo (Director of the Observatory of Relations with Latin America-UFP) remarked that while Brazil's performance has been successful, the same cannot be said of other countries in the region which are immersed in different economic dynamics. Murillo's questions to the speaker covered a range of issues: the impact of the government's current ideology regarding the country’s banking policy, to what extent strong action by public banking in the recent crisis is sustainable, and what kind of policies should be introduced to achieve lower interest rates and to increase access to banking credit.

>> Presentation of Enestor Dos Santos

With the collaboration of the Colegio de Economistas de Catalunya

Images