Economic Performance in the Americas

Economic Performance in the Americas

The Role of the Service Sector in Brazil, Mexico and the USA

Nanno Mulder

Economic Performance in the Americas compares the economic performances of Brazil, Mexico and the USA over the past half century. As with most other high and middle-income countries their economies are service-sector orientated and have been for several decades. This book encompasses all sectors of the economy but focuses primarily on services, analysing both the main trends in the various service industries in Brazil and Mexico and the underlying forces shaping their huge expansion.

Chapter 6: Financial Services

Nanno Mulder

Subjects: economics and finance, industrial economics


LONG-TERM DEVELOPMENT The Period 1800-1950 In Brazil the development of the financial sector accelerated around the second half of the nineteenth century. In 1850 there were only three commercial banks with deposits accounting for only 5 per cent of GDP, and a minor stock exchange in Rio de Janeiro. There were also several quasibanks, for example commodity traders and merchant houses who extended credit and accepted deposits. Four decades later, at the end of the Empire (1889), the quasi-banks had disappeared, and new banks and insurance companies had been created. By that time most metallic money was replaced by notes issued by the Treasury and commercial banks. Despite this the financial sector remained small, with a ratio of bank deposits to GDP of only 25 per cent. Banks rarely served as a source of finance for industrial companies.' Half the deposits were concentrated in a few banks in Rio de Janeiro, of which Bunco do BrusiZ was the largest. Although it was a private bank, it retained close relations with the Imperial government. In 1864 and 1875 major financial crises occurred, caused by failures of quasi-banks which lost large sums in Argentina and Paraguay. Between 1850 and 1890 about a third of the total government debt was financed by foreigners and two-thirds by domestic sources (Goldsmith, 1986). In the early years of the Republic (1889-91) an almost complete liberalisation of the financial sector, called the Endhamento, induced a rapid increase in the number of banks and a fivefold increase of...

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