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Brazil's Financial System: Resilience to Shocks, No Currency Substitution, but Struggling to Promote Growth

Jun 2003
Stanford King Center on Global Development Working Paper
170
By  Ilan Goldfajn, Katherine Hennings, Helio Mori

Brazil has evolved a financial system with a smaller presence of public banks and larger participation of foreign banks, less directed credit, and well capitalized banks. Over the years it has been resilient to shocks and was able to preserve the real value of savings in the system, thus avoiding both dollarization and disintermediation. However, the challenge of reducing the cost and increasing the volume of credit in the economy remains. Notwithstanding these hurdles, recent advances in the regulation of the financial system should pave the way for better intermediation and higher growth.