ABSTRACT
This chapter seeks to enquire whether the Brazilian financial system (BFS) has been functional for economic development. Orthodox theory maintains that the financial system is a neutral financial intermediary whose existence is justified mostly by its role in diversifying opportunities to savers and investors and minimizing agency costs between lenders and borrowers. Indeed, the functionality of the financial system is not a detail that can boost the results of each round of economic development, but a fundamental condition for development in the long run. The lack of a private financial structure to support economic development is an old and well-known limitation of the Brazilian financial system. Finally, the recent growth of the financial system in Brazil, in terms of both capital markets and credit markets, shows that the development of long-term financial relationships in Brazil has a long way to go.
