TITLE:
Brazil: Stock Markets and Corporate Credit Now Driving Financialization?
AUTHORS:
Lena Lavinas, Eliane Araujo, Denise Lobato Gentil
KEYWORDS:
Stock Markets, Corporate Financialization, Brazilian Economy
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.4,
August
19,
2022
ABSTRACT: The present article seeks to demonstrate that,
despite the steep deterioration in social and economic indicators in the midst
of an unprecedented social, political, and economic crisis, Brazil seems to
have entered a new stage of the process of financialization, now shaped by the
dynamics of the capital market. We briefly recall the different phases of
financialization in Brazil from eliticized- to mass-based, underlining how the
sharp decline in the prime rate as of late led to a strong valuation of financial
assets in the stock market. We test the hypothesis of a new financialization
pattern, now driven by the stock market, using in our regression model a sample
of 81 different segments (non-financial) from the Economatica platform, from
2010 to 2019. The results indicate a change of command in the finance-dominated
accumulation regime in Brazil, that is, corporate financialization is now also
determined by the stock market valuation process, due to the fall in return on
financial investments (notably government securities). Selic-driven
financialization has been substituted by other forces, such as corporate credit
and—a relevant new factor—investments in shares.