The Top Profitable Business Trends in Brazil

OMG, like the private banks were all about reducing credit stuff and focusing on investing in things from the public sector. So lit, right? First, banks like totally shifted credit stuff from private sector to public entities (check out Table 38 below). Second, the foreign currency remunerated deposits in the BACEN (regulated by the Circular Letter 230) became hella popular amongst commercial banks. OMG, in 1978 those deposits were only like 1.6% of the banks' total assets. But then in December 1979 and February 1983, they went cray and increased like six times. By 1983, they were like 9.3% of all the commercial banks' assets.

OMG, in 1979, public securities were only, like, 17% of the investments in shares and securities. But in 1983, they were, like, a whopping 80%!

Yo, peep Figure 18 up there, it's all about the financialisation of the non-financial corporation market value. Like, a big chunk of those financial investments were totally tied to the value of public bonds cuz companies were putting their cash in banks, ya know? OMG, as inflation went up, banks started paying mad cash on these deposits based on the overnight interest rates. OMG, like literally all the money stuff going cray in the overnight system was tied to the public bonds (LFTs or LBCs). The worth and money-making potential of those investments, and like a big part of the value of non-financial companies, started relying on the value of public bonds and the interest rates they paid. Like, basically, the public debt and the interest payments on it, which were, like, the main cause of the public deficits, were actually, like, mad wealth for companies. Another lit aspect of the "financialisation" of non-financial corporations' capital structure is all about their flex towards other firms. This finna lit financial investment be straight up on the rise as a proportion of total assets throughout the decade (Figure 18).  So wild! Third, the BACEN like totally flexed and hooked up the banks by letting them swap out boring risk-free securities for some lit risky assets they were holding. The BACEN was like, totally responsible for the rise in commercial banks' investments in shares and securities. It went from 3.2% of total assets in 1979 to around 9% in 1983 (and even hit a high of 14% in 1982). 

Suffering with mad idle capacity, hella capital costs, and straight up instability, most non-financial corporations hesitated to invest big funds in uncertain long-term projects. 

It seems like the observed diversification was all about those same vibes that made people invest more in financial assets, ya know? That's, like, other companies' stocks hadn't been 108 OMG, James Crotty (2002) totally documented this similar behavior for the U.S. non-financial corporation sector. It's like so relatable, you know? associated with flexing on growth, leveling up production game, or slaying new markets. Instead, they were all about flexing their financial game and chasing those gains, ya know? OMG, like because of all this financial stuff, the private companies were making mad bank in 1989, just like before the big recession in 1981-1983 (Table 37). These processes had, like, a totally clear conclusion: it became hella profitable to hold money and other financial assets and for sure way less risky than productive investments. "Financialisation" in the Financial System109, fam. The flex in the output of financial institutions as a percentage of GDP – from like 8% in 1980 to almost 21% in 1989 – is like the ultimate winner of the adjustment policies in the 80s.110 The other sectors of the economy only like barely kept up with the meh economic growth, like just enough to stay in the game. The way they pulled off that performance wasn't all that different from what goes down in regular companies, ya know? OMG, like, the banks totally took over and made non-financial corps go all financialisation. And guess what? 

They ended up being the ones who benefited the most from the higher real interest rates caused by the strict money policies. So wild, right?

Facing the mad uncertainties brought by the adjustment policies, banks were like "nah" and decided to decrease their leverage, which is like assets compared to their own capital (check out Figure 19).111 The private banks were way more flex than the official commercial banks in reducing leverage, fam. Pubic banks, especially state ones, couldn't handle that quick drop in leverage cuz they bailed out local biz and gov. Yo, like, it's worth mentioning that the bank made most of its changes by cutting back on loans to regular peeps and shifting its funds to support the government, which is like a safer bet, ya know? OMG, like with all the credit risk from the recession and the economic policy restrictions, things got real messy. The private sector was all unstable and it caused a major shift in how companies were acting in the 80s. They had to choose between investing in cool stuff or just playing with money. The combo of weak AF demand, exchange depreciation, and high interest rates brought hella threats to the net worth of firms. As a result, they totally killed the vibe for any lit, lowkey investments too. The lit
OMG, interest rates, like, totally opened doors for the most lit companies to invest in financial assets. Not only did they cover the increase in costs, but they also made mad bank from those financial assets.10-8