São Paulo – Taxes, problems enforcing contracts, and “weak” regulatory and fiscal framework were some of the factors that caused Brazil to drop two positions to the 32nd place in the 2012 edition of the Financial Development Report, released this Wednesday (31st) by the World Economic Forum. In the list, topped by Hong Kong, Brazil ranks lower than Chile, which according to the survey has the best financial system in Latin America. Among the Arabs, the best ranked country was Kuwait, which climbed seven positions to the 21st place. The survey is released annually since 2008.
To assess the financial systems, the survey covered the performances of 62 countries in seven different “pillars” and other subpillars, to wit: institutional environment, which evaluates corporate governance and contract enforcement; business environment, which considers factors such as taxes, human capital and costs; and financial stability (sovereign debts and banking crises); financing banking services, which covers the size of banks, their efficiency and transparency; non-banking financial services (such as insurance and listings); financial market (bonds, derivatives and foreign exchange); and access to financial services, such as access to retail.
According to the study, Brazil has lost positions due to poor performance in pillars such as financial stability, in which it ranks 24th, financial markets and financial access, in which it ranks 32th. The country’s performance remained stable in the rankings of currency (6th) and banking system stability (33rd). The country ranks poorly, however, in business environment (49th), fiscal regime (58th), high cost of doing business (48th) and for having weak human capital compared with other countries (43rd). Brazil ranked well in non-banking services (11th) and insurance (10th).
Chile, which overtook Brazil, ranked 2nd in the low sovereign debt risk, 7th in financial stability, and 11th in banking stability. Still, the country performed badly in retail access to credit and due to small, inefficient banking system.
Of the Arab countries, Kuwait ranked best because, according to the study, it has strengthened priority aspects of the study, such as financial access, in which it ranks 10th. With regard to so-called “subpillars,” the country ranked 12th in financial stability, 1st in sovereign debt risk, and 15th in currency stability.
All other Arab countries in the ranking went down in the ranking compared with 2011. Bahrain dropped from 24th to 25th; the United Arab Emirates dropped from 25th to 26th; Saudi Arabia, from 23rd to 31st; Jordan, from 32nd to 33rd; Morocco, from 42nd to 45th; and Egypt, from 49th to 53rd.
The top ranking countries have not changed from 2011, and remain in the following order: Hong Kong, United States, United Kingdom, Singapore, Australia and Canada. Japan, Switzerland, Holland and Sweden complete the list of ten nations with the most developed financial systems in the 2012 edition of the survey.
The executive chairman of the World Economic Forum, Klaus Schwab, stated in the report that generally speaking, countries have been stricken by crises, starting in 2008, which have weakened their economies. He also said the small signs of recovery have been outshined by the overall frailty of the global financial system, characterized by growing spending on financing, commodities prices, and volatile capital flows. “Given these uncertainties, it is clear that restoring faith in the markets will be a monumental task for policymakers in both advanced and emerging economies.”
*Translated by Gabriel Pomerancblum
