Abstract
The Banco do Brasil was one lynchpin driving Brazilian economic and financial performance during periods of extreme growth and contraction between 1964 and 1986. The bank simultaneously served as a monetary authority and development bank, and it was also the nation’s largest commercial bank. This paper assesses the Banco do Brasil’s commingling of these functions to further both economic policy and its own commercial growth. The paper begins with a stylized overview of Brazilian economic history from 1964 to 1986 to establish the framework for the Banco do Brasil’s political functions and business profile. The next section assesses the opaque financial reporting of Banco do Brasil balance sheets, disentangling the interplay of its commingled functions. Then, we explore the toolkit available to the Banco do Brasil, but not to other commercial banks – money creation, credit allocation and distribution – and demonstrate how the bank invoked these tools in the changing scenarios of the Economic Miracle, increasing inflation, and response to petroleum shock, as well as conflicts that arose between its policy functions and business strategy. The conclusion emphasizes that the overwhelming predominance of the Banco do Brasil was a strong continuous thread connecting the political-economy regimes through the period and it laid the ground for the nature of subsequent private financial sector.
Deeper understanding of the bank’s functions and activities during these years adds perspective to the interrelationship between the bank’s public and commercial functions and Brazilian economic performance and development strategies. The role of the Banco do Brasil in the country’s financial development during the third quarter of the twentieth century is important beyond Brazil; it demonstrates the extent to which one dominant institution can capture a financial system and shines a light on the importance of the financial market organization within the ambit of industrial policies