The following OECD assessment and recommendations summarise chapter 2 of the Economic Survey of Brazil 2005.
Private investment can be encouraged by facilitating access to cheaper, more abundant credit
Brazil’s financial markets will need to develop further to facilitate access by private investors to more abundant, cheaper credit. New bankruptcy legislation, once approved, is expected to ease constraints on loan recovery, while protecting the value of collateral and jobs. This is a necessary, although not sufficient, condition for encouraging credit creation and reducing intermediation costs. The real test for the reform strategy will nevertheless be in implementation. Additional measures to encourage the expansion of credit and reduce intermediation costs would include the gradual phasing out of directed credits to agriculture and housing, while remaining attentive to the need for public action in the case of market failures, especially with respect to low-income households; the gradual alleviation of the tax burden on financial intermediation, once public finances improve; and continued strengthening of the credit information industry, primarily by enhancing portability of positive information on credit history. Other measures in the government’s broad structural reform agenda includes the on-going reform of the legal system and initiatives to encourage housing finance, which can do much to improve the security of property rights, lowering borrowing costs.
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