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The Impact of the Economic Crisis on the Financial System and Accounting in Brazil Marcelo Botelho C. Moraes
Introduction In this first section, we will focus on three major financial markets in Brazil: the banking industry, which is the largest intermediation market and highly concentrated in only six financial institutions; the equity market on the B3 (São Paulo) stock exchange; and the bond markets for corporate and government bonds, also on the B3 after the merger of BM&FBovespa (stock exchange, future, and commodities markets) and Cetip (over the counter [OTC] markets) in 2017. Following this description of Brazilian markets, we will discuss the accounting regulations and financial instruments since the full adoption of International Financial Reporting Standards (IFRS) in 2010. To understand the Brazilian market, we must know its institutional structure. Brazil is one of the largest countries in the world; in 2016 Brazil had a population over 206 million people and a gross domestic product (GDP) of USD 1,796.2 billion (OECD, 2018) with a projection of GDP USD 2,138.9 billion for 2018 (IMF, 2018), which makes it the ninth largest economy in the world and the largest in Latin America. Despite its great potential, the Brazilian market is not an easy place to do business, especially because of bureaucracy; it ranks in the 125th position on the World Bank’s Doing Business Index (World Bank, 2018), as we can see in Figure 9.1. There are two systems in the Brazilian financial system: normative and intermediate. Normative institutions regulate financial institutions and are responsible for controlling the financial market to avoid abuses and implementing federal policies. The National Monetary Council (CMN, Conselho Montetário Nacional) mainly controls this system for currency, credit (and debt), equity, and foreign exchange, and the Central Bank of Brazil (BCB, Banco Central do Brasil) and the Securities and Exchange Commission (CVM, Comissão de Valores Mobiliários) serve a supervisory function. In other words, CMN controls the financial markets examined in this chapter. CMN’s main function is to establish the defining guidelines for government monetary policy regarding Brazilian bonds and interest rates,
