Regulatory Impacts on Financial Services in US-Brazil Trade

 The Brazilian economy becoming more like a bank is not a new thing. In the 1980s, Brazil was a part of the logic of financial accumulation under very specific macroeconomic and structural conditions, even before the international literature did a better job of covering the subject by defining the status of the theoretical idea of financialization. This study looks at the phenomenon of financialization from a macroeconomic point of view, even though it acknowledges the value of micro and sectorial analysis found in recent international literature. Once it is established, financialization affects the way the economy grows, as well as the overall policy and situation in the economy. Depending on how it forms into a real social formation, it will have different impacts on how aggregate demand changes and how fast useful fixed capital builds up. Some financialization patterns can help growth (Boyer, 1999), while others may slow it down. However, the long-term stability of these plans depends on structural or institutional factors that need to be tested in each country being studied.

A number of real-world studies have tried to find out how national plans for economic liberalization change the structure of industrial production

In this case, changes in exchange rate regimes—that is, the rules that govern how the exchange rate is managed—have been a good place to start for a thorough look at how industries have changed since trade and financial opening have become much more widespread. There are, however, still not enough studies on how exchange rates affect the success of industry in Brazil, which is different from what happens on the international stage. Even though people talk a lot about the good things about a service-based economy by using terms like "knowledge economy," "post-industrial economy," and "new economy," history shows that industry is still what makes countries grow. Even though services have become more important in terms of quality and quantity, industry is still the main source of basic inputs for service activities. The change from manufacturing jobs to tertiary jobs doesn't always mean that the secondary sector is less important to the economy, because creating value in services still depends a lot on turning ideas, new technologies, and infrastructure from industrial production processes into real things. To add to the idea that the industry isn't taken seriously enough, many tasks that were once thought of as industrial have been renamed and put on the list of services because they are cheaper and better for the company when they are outsourced. This piece suggests looking into the connection between the value of the real estate market and the performance of Brazil's manufacturing sector from 1980 to 2008. A lot of research has been done on how the exchange rate affects the organization of industries around the world. Many studies of the Brazilian economy, on the other hand, have not paid much attention to this topic. The only exceptions are Bresser-Pereira (2007, 2008, 2009, 2010), Bresser-Pereira & Marconi (2008), and Bresser-Pereira & Nakano (2003), which have been writing about the relationship between exchange rate and economic growth since the start of the decade. They have been pointing out the risks of deindustrialization that come from the Brazilian economy's persistent tendency to real appreciate the currency. 

Bresser-Pereira says that this process is similar to what happened in the Netherlands and causes the Brazilian industry to focus on making low-value goods and items

The main goal is to figure out what direction the changes are going because of the new way of integrating internationally that became more common in the 1990s. Our study adds to the body of evidence for the deindustrialization and Dutch disease theories that are at the center of the current discussion about how the real appreciation of the exchange rate affects the Brazilian economy. In addition, it tries to show how the current system of economic growth in Brazil fits in with the newest changes in the industry. What this means is that the U.S. problem spread first through the real economy and then through the financial economy. When expectations dropped and there was a lot of uncertainty in the second half of 2008, the latter responded in a much more defensive way. Also, the balance sheets of the country's biggest banks were not involved in products that were seen as too risky, like subprime derivatives.This paper is organized in this way. In Section 2, we explain what complementarity and order of institutional forms mean and how they apply to the case of Brazil. This part also tries to set up three different time periods with three different kinds of institutional forms in terms of their order and how they work together. The institutional setups of each of these times determined the specific ways of regulating and the growth regimes that went with them. Based on the findings in Bruno et al. (2009), Section 3 describes the current process of financialization in the Brazilian economy, including where it came from and how it has changed over time. 

There are two different types of financialization that go with two different sets of monetary and financial rules

Section 4 talks about how financialization has changed the growth regime, mainly by looking at important changes in the structure of industries. It looks at the reasons behind the sharp drop in the manufacturing industry's share of GDP, which is one of the most important generalized facts of recent economic events in Brazil. It is based on the idea that the same institutional structures that keep the process of financialization going in Brazil also keep the exchange rate going up in real terms. Because of this, the high-value-added businesses have become less and less competitive over time. But one of the problems the government is trying to solve is how to set up the institutions of the state. There is now a vicious circle: when local interest rates go up, more capital comes in, which causes prices to rise even more. But because the government has to stop the growth of foreign funds, it issues new debt, which causes interest rates to rise. As the Brazilian economy becomes more globalized and people around the world save and invest money, a lot of money is sent back to Brazil in the form of gains, interest, and other types of income. Because of long-term problems with the balance of payments, interest rates will need to be raised again, which will bring in more short-term capital. It is the goal of Section 5 to show how Brazil's current regulatory mode helped the effects of the U.S. crisis spread quickly to the real economy sector. At the same time, the high and rewarding internal public debt protected the banking and financial sector from operations with riskier products. In it, the specifics of the competitive regulation mode are laid out, along with what that means for how the U.S. problem will affect the Brazilian economy. In Section 6, the main results are explained, and thoughts on how the national business might change will be shared.