The Inexorable Evolution of Financialisation by Domna M. Michailidou

Author:Domna M. Michailidou
Language: eng
Format: epub
ISBN: 9781137553652
Publisher: Palgrave Macmillan

Figure 7.5 Brazil’s public debt, percentage of GDP

Source: World Bank.

Figure 7.6 Brazil’s private debt, US$ (2012)

Source: World Bank.

The sudden and volatile injections of capital in Brazil (Figure 7.3) together with the persistent expectations for them to be prolonged, given the policy of the Dollar peg, were constantly pushing towards an increasingly overvalued currency. This brought the economy into the oxymoronic predicament of needing to maintain both high and low interest rates. The overvalued currency was needed to attract inflows and fight inflation; thus, high interest rates were maintained to keep the reserves of the Central Bank in line with the incoming capital, while at the same time low interest rates were needed to support the lending of domestic banks, which was denominated in US dollars (Figure 7.6).

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