A note on financial regulation and the Brazilian response to the 2008‐09 financial crisis

Abstract

Brazil was frequently criticized for its interventionist and heavy financial regulation up until the 2008‐09 world financial crisis. According to the neo‐liberal or pro‐market view that predominated in academic and financial circles during the early 2000s, economic development came together with financial deepening, which in its turn could only be achieved through financial liberalization and deregulation. The currency crises of the 1990s notwithstanding, by the mid‐2000s Brazil’s segmented financial market and its restrictive reserve and capital requirements were seen as a symbol of inefficiency and backwardness by most financial specialists. To the luck of the Brazilian population, most of the advices of such specialists were ignored by the Brazilian authorities, so that, when the 2008 financial crisis hit the world economy, Brazil still had powerful and efficient instruments to deal with the problem. The objective of this note is to present the mains aspects of the Brazilian financial regulation and how they helped the economy to deal with the consequences of 2008‐09 financial meltdown.