Back to First Principles
Rebuilidng Brazil's capital markets requires a good dose of public confidence. But that can only be achieved with a stable economy, plus more modest inflation and interest rates.
Most Brazilians view the financial markets as a glorified
casino infested with crooked speculators. As such, Brazil's
capital markets will only develop into a source of long-term
financing for industry or a safe and profitable place in which
to invest once the economy has stabilized and interest rates
are at reasonable levels. Yet the markets' strength and
vitality have become clear during the brief periods of low
inflation and interest rates, economic growth and a stable
policy environment.Three years after the 1994 Real Plan halted
hyperinflation, trading volume on the São Paulo Stock
Exchange rose to a record $1 billion a day. In 1997, market
capitalization of Brazilian companies peaked at $330.6 billion.
Stock prices climbed 300% in dollar terms between 1994 and July
1997, the month the Asian crisis began and triggered a
succession of economic disasters throughout the emerging
markets. In dollar terms, prices and turnover are now...
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