IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0969.html
   My bibliography  Save this article

Stagnation of the Brazilian Economy and Peripheral Financialization

Author

Listed:
  • Feijo, Carmen

    (Department of Economics Fluminense Federal University, Niteroi, Rio de Janeiro – Brazil and National Council for Scientific and Technological Development – CNPq, Brazil)

Abstract

This paper argues that peripheral financialization is tied to opening the developing economies’ capital and financial accounts. In the case of the Brazilian economy, the long-term result of economic integration in a hierarchical international monetary and financial system is the increasing decoupling of financial investments on one hand and domestic capital formation. This implies that the economy is stagnant, and the manufacturing sector reduced its weight in total value added. Consequently, the Brazilian economy lost complexity and specialized in commodity exports. We analyze the evolution of the Brazilian economy since the 2000s through the financial balances of the economy’s institutional sectors. We showed that the Brazilian economy was in an expansionary phase in the 2000s due to the excellent performance of the External sector. Policy space could be widened, and real interest rates, although very high, steadily declined. However, exchange rate misalignment and its overvaluation trend are a by-product of the financial integration of a peripheral economy, which largely explains Brazilian deindustrialization. The international financial crisis interrupted the expansive phase, and the 2010s was a period of economic reversion. We conclude that the reduced policy space due to financial integration, the greater vulnerability to external shocks, and the regression in the productive structure seem to head the economy to another lost decade.

Suggested Citation

  • Feijo, Carmen, 2024. "Stagnation of the Brazilian Economy and Peripheral Financialization," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(2), pages 207-232.
    • Handle: RePEc:ris:ecoint:0969
    as

    Download full text from publisher

    File URL: https://www.iei1946.it/article/pdf/download/1053/stagnation-of-the-brazilian-economy-and-peripheral-financialization
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jan Kregel, 2004. "Can we create a stable international financial environment that ensures net resource transfers to developing countries?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(4), pages 573-590.
    2. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    3. André Nassif & Carmem Feijó & Eliane Araújo, 2020. "Macroeconomic policies in Brazil before and after the 2008 global financial crisis: Brazilian policy-makers still trapped in the New Macroeconomic Consensus guidelines," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(4), pages 749-779.
    4. Luiz Fernando de Paula & Barbara Fritz & Daniela M. Prates, 2017. "Keynes at the periphery: Currency hierarchy and challenges for economic policy in emerging economies," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(2), pages 183-202, April.
    5. Paulo César Morceiro & Joaquim José Martins Guilhoto, 2023. "Sectoral deindustrialization and long-run stagnation of Brazilian manufacturing," Brazilian Journal of Political Economy, Center of Political Economy, vol. 43(2), pages 418-441.
    6. Fernando Ferrari-Filho & André Cunha & Julimar da Silva Bichara, 2014. "Brazilian countercyclical economic policies as a response to the Great Recession: a critical analysis and an alternative proposal to ensure macroeconomic stability," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(3), pages 513-540.
    7. Luiz Fernando de Paula & André de Melo Modenesi & Manoel Carlos C. Pires, 2015. "The tale of the contagion of two crises and policy responses in Brazil: a case of (Keynesian) policy coordination?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 37(3), pages 408-435, July.
    8. Ricardo Carneiro & Bruno De Conti, 2022. "Exorbitant privilege and compulsory duty: the two faces of the financialised IMS," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(4), pages 735-752.
    9. J. A. Kregel, 1999. "Was there an alternative to the brazilian crisis?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 19(3), pages 426-441.
    10. J. A. Kregel, 1999. "Was there an alternative to the brazilian crisis?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 19(3), pages 23-38.
    11. Mariana Finello Corrêa & Carmem Feijo, 2022. "Connecting financialisation and structural change: a critical appraisal regarding Brazil," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(5), pages 1005-1024.
    12. Leandro Monteiro & Carmem Feijó, 2023. "External Balance and Financialization: An Interpretation of the Evolution of the Brazilian Economy Since 2000," International Journal of Political Economy, Taylor & Francis Journals, vol. 52(2), pages 181-196, April.
    13. José Luis Oreiro & Luciano D’Agostini, 2017. "Macroeconomic policy regimes, real exchange rate overvaluation, and performance of the Brazilian economy (2003–2015)," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(1), pages 27-42, January.
    14. Pablo G. Bortz & Annina Kaltenbrunner, 2018. "The International Dimension of Financialization in Developing and Emerging Economies," Development and Change, International Institute of Social Studies, vol. 49(2), pages 375-393, March.
    15. Eduardo Mantoan & Vinícius Centeno & Carmem Feijo, 2021. "Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 529-550, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Botta, Alberto & Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano Toshiro, 2023. "Financial integration, productive development and fiscal policy space in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 175-188.
    2. Guizzo, Danielle & Strachman, Eduardo & Dalto, Fabiano & Feijo, Carmem, 2018. "Financialisation and Development: how can emerging economies catch up?," MPRA Paper 87076, University Library of Munich, Germany.
    3. Eduardo Mantoan & Vinícius Centeno & Carmem Feijo, 2021. "Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 529-550, December.
    4. Karsten Kohler & Engelbert Stockhammer, 2023. "Flexible exchange rates in emerging markets: shock absorbers or drivers of endogenous cycles?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 551-572.
    5. Kohler, Karsten, 2019. "Exchange rate dynamics, balance sheet effects, and capital flows. A Minskyan model of emerging market boom-bust cycles," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 270-283.
    6. Raquel Almeida Ramos, 2017. "The Fragility of Emerging Currencies Since the 2000s - a Minskyan Analysis," CEPN Working Papers 2017-18, Centre d'Economie de l'Université de Paris Nord.
    7. repec:hal:cepnwp:hal-01619118 is not listed on IDEAS
    8. José Luis Oreiro & Carmem Aparecida Feijó & Lionelo Franco Punzo & João Pedro Heringer Machado, 2021. "Peripherical Financialization and Premature Deindustrialization: A Theory and the Case of Brazil (2003-2015)," Working Papers PKWP2103, Post Keynesian Economics Society (PKES).
    9. Philip Arestis & Luiz Fernando Paula & Fernando Ferrari-Filho, 2007. "Inflation Targeting in Emerging Countries: The Case of Brazil," Palgrave Macmillan Books, in: Philip Arestis & Alfredo Saad-Filho (ed.), Political Economy of Brazil, chapter 8, pages 116-140, Palgrave Macmillan.
    10. Daniela Gabor, 2021. "The Wall Street Consensus," Development and Change, International Institute of Social Studies, vol. 52(3), pages 429-459, May.
    11. José Luis Oreiro & Carmem Aparecida Feijó & Lionelo Franco Punzo & João Pedro Heringer Machado, 2021. "Peripherical Financialization and Premature Deindustrialization: A Theory and the Case of Brazil (2003-2015)," Working Papers PKWP2027, Post Keynesian Economics Society (PKES).
    12. Pablo Gabriel Bortz & Nicole Toftum & Nicolás Hernán Zeolla, 2021. "Old Cycles and New Vulnerabilities: Financial Deregulation and the Argentine Crisis," Development and Change, International Institute of Social Studies, vol. 52(3), pages 598-626, May.
    13. Roberto Lampa, 2022. "Verso la disgregazione del sistema monetario post 1971? I paesi in via di sviluppo e l'impatto delle sanzioni belliche sulla dollar hegemony (Towards the disintegration of post 1971 monetary system? D," Moneta e Credito, Economia civile, vol. 75(298), pages 149-161.
    14. Philip Arestis & Fernando Ferrari-Filho & Luiz Fernando de Paula, 2011. "Inflation targeting in Brazil," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(2), pages 127-148.
    15. Carmem Feijo & Marcos Tostes Lamonica & Sergiany da Silva Lima, 2022. "Growth and stagnation in a dual economy: The case of Brazil," PSL Quarterly Review, Economia civile, vol. 75(301), pages 119-138.
    16. Jungmann, Benjamin, 2021. "Growth drivers in emerging capitalist economies before and after the Global Financial Crisis," IPE Working Papers 172/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    17. Akcay, Ümit & Hein, Eckhard & Jungmann, Benjamin, 2021. "Financialisation and macroeconomic regimes in emerging capitalist economies before and after the Great Recession," IPE Working Papers 158/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    18. Kohler, Karsten & Bonizzi, Bruno & Kaltenbrunner, Annina, 2023. "Global financial uncertainty shocks and external monetary vulnerability: The role of dominance, exposure, and history," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    19. Ianni, Juan Martin, 2024. "Macroeconomic policy regimes and demand and growth regimes in emerging market economies: the case of Argentina," Nülan. Deposited Documents 4076, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    20. Gabor, Daniela, 2020. "The Wall Street Consensus," SocArXiv wab8m, Center for Open Science.
    21. Bruno Bonizzi & Annina Kaltenbrunner, 2024. "International financial subordination in the age of asset manager capitalism," Environment and Planning A, , vol. 56(2), pages 603-626, March.

    More about this item

    Keywords

    Peripheral Financialization; Brazilian Economy; Deindustrialization;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

    Statistics

    Access and download statistics

    Corrections

    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:ris:ecoint:0969. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Angela Procopio (email available below). General contact details of provider: https://edirc.repec.org/data/cacogit.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.