Development with Inflationary Finance: 1945–63

John H. Welch
Additional contact information
John H. Welch: Federal Reserve Bank of Dallas

Chapter 2 in Capital Markets in the Development Process, 1993, pp 45-66 from Palgrave Macmillan

Abstract: Abstract The period 1945–63 in Brazil is sometimes referred to as the period of easy import substitution. Until 1961, when the ability to industrialise through import substitution industrialisation had ended, industrialisation was financed to a large extent through inflation. Domestic firms were protected by selective exchange controls and the ‘law of similars’ which allowed high tariff barriers to be erected on competing products.1 In general, firms financed long-term investment with the inflated retained earnings from protection, while financing working capital through short-term bank credit.2 Industrialisation proceeded by initially developing consumer durable production. The short-term and medium-term financial system grew up around consumer durables where commercial banks discounted the accounts receivable or ‘duplicatas’ of firms needing working capital. This system was complemented by the appearance of the bills of exchange (letras de cambio) market. Vertical integration was promoted by the generous application of the law of similars, the encouragement of multinational corporations to operate in Brazil, and direct government production in heavy industries such as steel, petroleum, transportation, and public utilities.3

Keywords: Interest Rate; Monetary Policy; Inflation Rate; Commercial Bank; Real Interest Rate (search for similar items in EconPapers)
Date: 1993
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-11211-1_3

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349112111

DOI: 10.1007/978-1-349-11211-1_3

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().