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Economy and Trade
The Brazilian economy
grew by 5.4% in 2007, improving on the previous growth of 3.8% (2006). Low inflation (4.46% in 2007) and consistently
prudent macroeconomic policies have contributed to increase the levels of
confidence in the country. At the
same time, the Brazilian energetic private sector companies are growingly
expanding their international operations.
Since 1998, the Brazilian public sector has been producing primary
fiscal surpluses, which have opened space for sensible reductions in public
sector debt, now amounting to approximately 45% of GDP. Brazil has in place a flexible
exchange rate regime – market forces determine the exchange rate – combined
with an inflation target mechanism guiding monetary policy. External accounts have been kept in good
shape. Brazil’s international trade
flows reached US$ 281.27 billion in 2007.
Exports amounted to US$ 160.65 billion and imports to US$120.63
billion. The trade surplus reached
US$ 40 billion. Brazil is global trader: 22.67% of its 2007 total exports were
directed 22.67% to Latin America, 25.17% to the European Union, 15.62% to Asia. The
three largest individual markets for Brazilian products in 2007 were the USA (US$ 25.1 billion), Argentina (US$ 14.5 billion) and China (US$
10.7 billion). Sixteen Brazilian
companies exported more than US$ 1 billion.
Foreign direct investment to Brazil amounted to US$ 34.6 billion in
2007. Brazilian reserves have been
kept at adequately high levels (over US$ 190 billion in April 2008).
The Brazilian
capital market
Brazil also has a vibrant and attractive capital
market: There are approximately 500
companies listed in the Brazilian stock market BOVESPA, where daily average
trade has been amounting to around US$ 3 billion. International investors have been
participating in 30 to 35% of the business.
In 2007, the value of aggregate stocks in the Brazilian market has
reached US$ 1 trillion.
Fnancial
Sectors and Markets
The financial and
banking system in Brazil
is a very modern one. It has been marked by a capacity to adapt to drastic
changes in macroeconomic conditions. It has successfully coped not only
with important challenges, such as the chronic inflation of the 1980s, but
also with severe shocks to the economy, such as the financial crises in the
1990s that led to a drastic devaluation of the currency. The positive
response of Brazil
to the currency crisis was due, among other factors, to the restructuring
of the banking sector and the strengthening of prudential regulation and
financial regulation undertaken since 1995.
Brazil has in São Paulo the leading
stock and commodities and futures exchanges in Latin America. In 1999,
BOVESPA - the São Paulo Stock Exchange -
accounted for more than twice the total value traded in Buenos Aires, Mexico and Santiago stock
exchanges. Besides its leading role in Latin America, BOVESPA has
been for a long time the dominant exchange in Brazil. In 2000, it
merged with other stock exchanges in Brazil, such as Rio de Janeiro’s, paving the
way for possible integration of Latin American markets. Brazil’s stock market
has been seen as one of the strongest regional players in the world,
jointly with markets in the US, the UK, Germany, Hong Kong, Japan and Australia.
The Commodities and Futures Exchanges (BM&F) is one of the world’s five
largest markets of that kind.
Regulation and Supervision
The National
Monetary Council (Conselho Monetário
Nacional) is the body responsible for the
macro-stability of the financial system, through the monitoring of the set
of policies that affect the system with respect to monetary, credit,
exchange rate and public debt issues. It is integrated by the Ministers of
State for Finance and for Planning, Budget and Management, as well as by
the Governor of the Central Bank.
The Central Bank deals with the regulation and
supervision of most financial activities: multiple banks, commercial banks,
savings banks, credit cooperatives, development banks, consumer finance
companies, and savings, loan and mortgage companies or associations. Other
regulators are the Securities and Exchange Commission (CVM), the Private
Insurance Superintendency (SUSEP) and the
Complementary Pension Secretariat (SPC). The Securities and Exchange
Commission regulate the stock exchanges, including
its clearing system. It also regulates, jointly with the Central Bank,
commodities and futures exchanges, investment banks and funds, foreign
investment portfolios, securities dealers and brokers. SUSEP is mainly in
charge of insurance companies and private pension funds.
Banking Activities
Today the banking system in Brazil is very diversified, combining
strong domestic institutions and internationally known financial groups.
The Executive has the prerogative to allow the establishment of foreign
banks and has adopted a very positive approach in the last years,
contributing to the entrance of foreign investors in the sector.
Figures of the Central Bank show that the major retail banks are
still Brazilian institutions: Banco do Brasil and Caixa Econômica Federal, from
the public sector; and Bradesco and Itau, from the private sector. Nevertheless, the
opening up of the sector has progressed in the past few years, thanks to
privatisation and liquidation of many institutions. Among the 50 top banks
in Brazil, about half of
them have either foreign origin or at least a foreign associated partner.
Examples of British and European presence in this sector are ABN AMRO, Santander, HSBC, Creditanstalt,
BBVA, Lloyds, Deutsche, ING, Barclays and Dresdner. A few of them, such as
ABN, HSBC and Santander, have already
consolidated an important presence in retail banking.
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