PLANO NACIONAL DE RESÍDUOS SÓLIDOS - Revista O Papel

Economic Sector ArticleBY Ricardo Jacomassi,Chief Economist at Hegemony Projeções Econômicas: ricardo.jacomassi@hegemony.com.brsérgio britoSoundness of Brazil’sfinancial systemMore than a decade ago, it would be impossibleto imagine that the two most importantfinancial institutions worldwide would reportsomething positive about Brazil’s finances. Being a rareexception among countries, the mission coordinated bythe IMF (International Monetary Fund) and the WorldBank in March highlighted Brazil’s sound financialsystem. And the compliments were many.The Financial Sector Assessment Program 1led by the two institutions was implemented in 1999and consists of an in-depth analysis of the financialsector of developing and industrialized countries.The two main objectives are: analyze the financialstability and development dynamics of financialsystems. Together they can offer information aboutthe financial relationships between economies.In one of the most important parts of the report, the IMFand World Bank mission declared:“The FSAP 2 mission concluded that Brazil’s financialsystem is stable, with a low systemic risk level andconsiderable protection margins. High capital margins,coupled with high levels of international reserves and aflexible exchange rate, have helped the economy absorbrecent external shocks. With regards to challengescreated by the inflow of volatile capital and the rapidexpansion of credit, Brazilian authorities have been ableto effectively apply macroprudential measures to containsystemic risks”.This is a major achievement for the country,particularly in view of the exposed fractures onthe part of financial systems of countries like theUnited States and others in the Euro region. EvenChina’s financial system is presenting unsustainableconditions in the long term, such as, for example, theexcess credit directed at state-owned companies.However, before throwing all the merits received inMarch 2012 on the table, it is important to inform thatthis achievement took more than a decade, followingimplementation of the Real Plan and reformulationof the Financial System, both during the FernandoHenrique Cardoso administration.Putting all positive points aside, the missioncoordinated by the two entities highlighted two mattersthat could prevent the development of capital markets:(i) high interest rates; (ii) and the majority of financialinstruments being short-term.To limit these points for financial institutionsit is necessary “that inflation continue droppingand internal savings (public and private) continueincreasing. Additionally, certain reforms in the financialsector could encourage this process, especially bystrengthening the role of institutional investors.As interest rates continue to drop, stimulating thedemand of investment funds for longer-term securities,well articulated measures will also be necessary toincrease the offer of corporate securities, in order totake advantage of this increase in demand”.Everyone knows that a balanced financial systemis an essential condition for economic growth and itslong-term equilibrium, however, it is necessary that notonly the Financial System present such conditions.The productive system, that is, the industrial sector,needs to achieve the same level of sustainability andcompetitiveness. Just like the reformulations thatwere made to strengthen the Financial System, we didthe same effort in the Productive Sector.Maintaining current conditions, industry will notsupport its production bases for a very long time, asit is more advantageous to import than to produce.Production does not need protectionism, alwaysassociated to the right-now short-term vision. Asa producer of wealth and a source of added-value,industry needs reformulations that ensure the sameconditions of competition that its peers have today.Let’s see what happens!•1. < http://www.imf.org/external/lang/portuguese/np/sec/pr/2012/pr1297p.pdf >2. FSAP: Financial Sector Assessment Programabril/April 2012 - Revista O Papel57