As Transformações no Sistema Financeiro Internacional

Marcos Antônio Cintra

O sempre ótimo pesquisador Marcos Antônio Cintra, ex-colega do IE-UNICAMP, hoje no IPEA, enviou-nos o link de seu último livro e a mensagem de divulgação em inglês.


CINTRA, Marcos Antonio Macedo & GOMES, Keiti da Rocha (Orgs.) As Transformações no Sistema Financeiro Internacional [The Transformations of the International Financial System]. Brasília, IPEA, 2012.


The assumptions that supported the conception of self-regulated markets have been put in check with the world financial meltdown of 2008. The dominance of this conceptual apparatus, especially in recent decades, has strengthened the argument in favor of greater freedom in financial environments, triggering a generalized process, especially in the United States, of dismantling the regulatory structures. As its legacy, the world has witnessed the aftermath of the worst global financial crisis since the United States stock market crash of 1929, reflected in the stagnation of economic activity of the world’s core developed countries, such as the United States, Japan and European Union countries.

If on the one hand the 2008 crisis challenges the prevailing premises, on the other hand its depth and systemic implications are unique since the Second World War, which poses an obstacle to the understanding of ongoing changes in the international financial system and of its strong connections with the economic, political and social dynamics of countries. Initially, the opacity that characterized the evolution of the disruptions in the subprime mortgage market surprised the world and strengthened the argument for a more direct supervision of markets. Several initiatives in this direction have been put in place by governments of the United States and the European Union, as well as in agreements of the G20 and the Basel Committee.

However, after the initial perplexity, criticisms proliferated about the real effectiveness of these initiatives. Among the pessimists, the dominant view was that the measures adopted were characterized by superficiality and not facing key issues in the functioning of financial markets. In this situation, a return to normality does not mean a gain for society, but the maintenance of a financial structure potentially risky and doomed to further crises.

Based on this view, it is extremely desirable to broaden the understanding of the changes in the international financial system, looking for mechanisms that promote economic and social development. In this sense, this book brings together the reflections of leading researchers on the subject, and is organized in 17 chapters. The first chapter, “The G20 and the reform of the financial system: possibilities and limitations”, written by Fernando J. Cardim de Carvalho, provides an assessment of the performance of the G20, aiming to discuss the group’s perspectives on the challenges it faces, taking into account its limitations. Thus, the author examines the role of the G20 in its first decade, from 1999, when it was created, until 2008, when its role was drastically changed. He also discusses the major initiatives of this group on the topic of financial reform in the period after the outbreak of the financial crisis in the United States, and examines the prospects for the group’s future in this area.

In Chapter 2, “The United States financial regulation: the Dodd-Frank Wall street reform and consumer protection Act in current and historical perspective”, Jan Kregel, based on the analytical structure of the financial fragility hypothesis proposed by Hyman Minsky, analyzes the major changes in financial regulation in the United States embodied in the Dodd-Frank Act of 2010, aimed at preventing a collapse in the financial system similar to the crisis of 2007-2008. The author discusses if the Dodd-Frank may actually prevent another crisis from happening again.

In Chapter 3, “The European Union financial system after Lehman: policy and regulatory responses”, Elisabetta Montanaro and Mario Tonveronachi observe the importance of analyzing the European financial sector reforms as part of the overhaul of the entire project of the European Union. To understand the European answers to the crisis, the authors describe the most striking features of the European financial system and the recent steps of the process of regulatory harmonization, with emphasis on management and resolution of cross-border crises. In addition, the text provides a description of the evolution of the crisis in the region since its first phase – financial crisis – until its unfolding into the sovereign debt crisis, also analyzing the political and regulatory responses. The authors also highlight the dangers of an approach to the issue of regulation that seems unable to significantly reduce systemic weaknesses.

In Chapter 4, “The dilemmas of economic policy in the ‘post-crisis’”, Maryse Farhi discusses the turbulent post-crisis period, the different diagnoses and the various economic policy measures adopted by the major developed economies. Firstly, the text addresses the convergence of countercyclical macroeconomic policies adopted at the peak of the crisis and its theoretical underpinnings. Secondly, the author examines the differences in these policies that emerged during the unfolding of the crisis, particularly between the policies of the European Union and the United States.

In Chapter 5, “The genie out of the bottle: the evolution of too-big-to-fail policy and banking strategy in the United States”, Gary A. Dymski critically examines the too-big-to-fail banking policy in the United States. In the author’s view, this policy has evolved from a tool used by government authorities in order to maintain financial-market stability, into a constraint imposed by a megabanking complex on financial and regulatory policy. If, on the one hand, it prevents the occurrence of bank runs, on the other hand, it establishes a pre-commitment to preserve some financial companies no matter the economic damage their risk-taking may have caused. According to Dymski, a growing number of economists, including those who once welcomed financial deregulation as a gateway for efficiency gains, are now agreeing to the imposition of limits to prevent financial institutions from taking systemic risks. The question is how to put the genie back into the bottle.

In Chapter 6, “The housing finance in finance-led regime: institutional peculiarities of the U.S. and France”, Rafael F. Cagnin analyzes the financed-led growth regime in the United States and France during the context of real estate valuation that was intensified in early 2000. According to the author, despite experiencing the same regime of growth, important national differences persist between the United States and France, with American families in a more favorable position than the French families regarding the mobilization of their wealth crystallized in the form of residential property. Nevertheless, in the absence of the recovery of real estate markets and in the permanence of depressed financial markets, he shows that the “poverty effect” has replaced the wealth effect, which occurred in the 1990’s and 2000’s.

In Chapter 7, “What would a systemically resilient financial system look like?” Avinash D. Persaud proposes a reflection on the different types of financial risk in the security markets. The financial regulation, according to the author, should be focused on organizing the risks in the financial systems in order to limit their systemic propagation. The core of this organization should consider two concepts: i) there are different types of risks, each with distinct ways to be hedged or absorbed, and ii) there is a diversity of market participants with different capacities to absorb risks. Working with this diversity is critical in creating a systemically resilient financial system.

In Chapter 8, “Hedge funds and the implications for Brazil”, Keiti da Rocha Gomes and Marcos Antonio M. Cintra analyze the evolution of the hedge funds segment in the context of changes in the U.S. financial system, with special attention to the recent movement of investors into the Latin American market, mainly to Brazil. Two episodes, the bankruptcy of LTCM fund in 1997 and the collapse of two hedge funds managed by Bear Stearns in 2007, have raised awareness throughout the world regarding the power of these entities in causing systemic disruptions and have also justified concerns regarding these movements. The authors discuss the importance of designing a regulatory framework for the sector and comment on how Brazilian regulation may be an example at the international level.

In Chapter 9, “The regulation of the financial system after the crisis”, Simone Silva de Deos discusses, from the theoretical perspective of Hyman Minsky, the new proposals for regulating the financial system, particularly the banking sector, which have been under discussion and introduced in the financial system of the United States and the European Union. For this, the author analyzes the main characteristics of the banking regulation in effect at the time of the crisis, and assesses the new format of regulation to be applied internationally resulting from discussions within the G20 and the Financial Stability Board.

In Chapter 10, “The European Investment Bank and its role in regional development and integration”, Stephany Grifth-Jones and Judith Tyson present the main features, functions and evolution of the European Investment Bank, which is by far the biggest development bank in the world. The paper discusses the role of this institution in the process of European economic integration and analyzes the possible lessons for Latin American development banks, including specifically Brazil. The authors also propose a reflection on the creation of a regional development bank for Latin America and the Caribbean, owned by the countries from the region.

In Chapter 11, “Banking regulation and institutional arrangement post-crisis: the role of the Financial Stability Board and Basel III”, Ana Rosa Ribeiro de Mendonca discusses the changes proposed to the Basel II regulatory regime, known as Basel III, based on the interaction between the G20, the Financial Stability Board and the Basel Committee on Banking Supervision. The author’s discussion on Basel III, which is at the center of the regulatory reform agenda, focuses on the regulation of banks after the 2008 crisis and points out that the new scheme is not free from the logic that seems to have contributed to the crisis. The new scheme has maintained this logic, despite trying to minimize it.

In Chapter 12, “From Basel II to Basel III: the same challenges?”, Jean Toledo de Freitas evaluates the Basel III agreement highlighting the main changes made to the format of the Basel II, and analyzes the former in face of the challenges of regulation within the current international financial architecture. From the observation of the role of banks in the evolution of economic cycles and of the way expectations are formed in a context of uncertainty, the author discusses the importance of the Basel III not restricted to its micro-prudential features, focusing only on the conditions of solvency of banks, individually. Differently, it shows the importance of incorporating macro-prudential supervisory structures, in order to reduce regulatory gaps in an environment of constant innovation.

In Chapter 13, “Structural Instability and the evolution of international flow of net private capital to the periphery (1990-2009)”, Giuliano Contento de Oliveira discusses the behavior of the international private net capital flow into developing economies since the 1990s, contemplating the moment of resumption of these flows to peripheral economies and the global crisis. The author argues that, although the constitution of “foreign shields” has not prevented the “contagion effect” among economies – by not attacking the cause of instability of international flows of private capital, structural in nature –, the strategy proved very important so that many of the countries could actively accommodate the adverse impacts caused by the abrupt reversal of these flows, in a non-subordinate way.

In Chapter 14, “The international monetary disequilibrium in the 2000s”, Luiz Afonso Simoens da Silva analyzes the characteristics of the international monetary dollar-flexible system with emphasis on the instability of exchange rates, which is measured by its trends of appreciation or depreciation. In this scenario, the article discusses some currencies intended as a substitute for the dollar – the euro, the yuan and the Special Drawing Rights. The author also examines the implications of currency imbalances to the Brazilian economy.

In Chapter 15, “The Special Drawing Rights and reform of the international monetary system”, José Antonio Ocampo discusses the problems of the contemporary international monetary system and proposes a reform that puts the Special Drawing Rights at the center of the system. The chapter focuses on two proposals for reform outlined in March 2009 by the head of the Chinese People’s Bank (the central bank of China) and by the Commission of Experts on Reforms of the International Monetary and Financial System, convened by the President of the General Assembly of the United Nations and led by Professor Joseph E. Stiglitz. Both have suggested profound changes in the international monetary system directed to correct its imbalances, liquidity problems and potential instability.

In Chapter 16, “Reforming multilateral institutions (past and present): the World Bank and the International Monetary Fund”, Jaime Cesar Coelho analyzes whether the ongoing transformations in the international financial architecture are merely conjectural accommodations or if they represent changes, even if incremental, which point to a long-term transformation, namely, a structural modification. The chapter develops an institutional critical analysis of the literature on international political economy, accepting rationalist assumptions, but advancing within a reflexive perspective.

Finally, in Chapter 17, “Systemic crisis and the Age of Indeterminacy in the beginning of XXI century: macroeconomic developments and financial wealth since the crisis of 2007-2009”, José Carlos Braga, supported by a realistic and consistent theory of capitalist dynamics, argues that the global systemic crisis which began in 2007 in the United States should be understood as a historical novelty. According to the author, this is a specific event among a long list of crises, including those that occurred after 1971-1973, when the regulation under the Bretton Woods agreements collapsed.

Keiti da Rocha Gomes & Marcos Antonio Macedo Cintra

As Transformações no Sistema Financeiro Internacional – volume 1
Marcos Antonio Macedo Cintra e Keiti da Rocha Gomes (Organizadores)
As Transformações no Sistema Financeiro Internacional – volume 2
Marcos Antonio Macedo Cintra e Keiti da Rocha Gomes (Organizadores)

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