International and Domestic Financialisation in Middle Income Countries; The Brazilian Experience

This paper analyses the recent changes in financial practices and relations in emerging capitalist economies (ECEs) on the basis of using the example of Brazil. It argues that in ECEs these financial transformations, which are akin to those observed in Core Capitalist Economies (CCEs) summarised under the heading of financialisation, are fundamentally shaped by their integration into a financialised and structured world economy. Moreover, this integration takes place in a subordinated way. The paper draws on the multidisciplinary framework of international currency hierarchies in order to analyse this subordinated financial integration and tendency toward financialisation. It shows how the existence of a hierarchic international monetary system has changed the financial behaviour of domestic economic agents as well as the structure of the domestic financial system. In doing so, the paper focuses on two specific channels. The first channel highlights the phenomenon of reserve accumulation and the changing behaviour of domestic banks. The second channel concerns the ECEs’ sustained external vulnerability and the impact of such vulnerability on the operations of Brazilian firms. The paper shows that not only have these financial transformations been shaped by ECEs’ subordinated financial integration, but also that these financialisation tendencies have contributed to cementing existing hierarchies and deepening uneven economic development.