São Paulo – This Wednesday (21st), the International Monetary Fund (IMF) and the World Bank disclosed the conclusions drawn by their technicians after assessing the country’s accounts from March 6th to 21st. in the document issued by the IMF, the two institutions claim that Brazil handled the financial crisis successfully and that the banking system is stable, with low risk exposure and capacity to withstand economic shocks. They warned, however, that high interest rates hamper the issuance of credit.
The mission met with Brazilian authorities, among them the Central Bank chairman Alexandre Tombini, and was headed by Dimitris Demekas, of the IMF, and Augusto de la Torre, of the World Bank. The study is part of the Financial Sector Assessment Program (FSAP), which monitors the economy of emerging countries.
According to the mission that visited the country, infrastructure and strong regulation of financial markets are important in maintaining stability. Nonetheless, the insurance sector’s solvency requirements are more risk-sensitive and public-disclosure intensive. Thus, the study advises, supervision of brokers and groups should be enhanced.
According to the two institutions, the operational independence of the Superintendence of Private Insurance (Susep, in the Portuguese acronym) and of the National Superintendence of Complementary Pensions (Previc) must be increased. The IMF and the World claimed that there are “budget and human resource restrictions” and advises on the strengthening of regulatory agencies.
The technicians conclude that Brazilian authorities were “swift, flexible and successful” in fighting the crisis, even though they believe “some reforms” could help the country prevent economic shocks in the future.
“The authorities should be congratulated for their important role in maintaining financial stability. Besides the strict regulation of the banking sector and strong consolidated supervision, a range of measures to restore market stability and preserve confidence were used,” according to the IMF and World Bank.
To the technicians, there is progress to be made in long-term private finance, and that capital market development is impeded by the country’s high interest rates. They believe that as interest rates fall further, they will spur mutual funds´ demand for longer-duration, well-articulated actions to enhance the supply of private securities, enabling the country to take advantage of the increased demand.
*Translated by Gabriel Pomerancblum
