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Banks, Financial Markets, and Industrial Development: Lessons from the Economic Histories of Brazil and Mexico

Banks, Financial Markets, and Industrial Development: Lessons from the Economic Histories of Brazil and Mexico

Chapter:
(p.257) 7. Banks, Financial Markets, and Industrial Development: Lessons from the Economic Histories of Brazil and Mexico
Source:
Latin American Macroeconomic Reforms
Author(s):
Stephen Haber
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226302683.003.0009

The banking systems of most Latin American countries are small, concentrated, and inefficient. Financial markets do not serve as substitutes for banks: few firms can mobilize capital through the markets, and even the largest exchanges tend to be dominated by one or two issues. What effects do underdeveloped financial markets and banking systems have on the real economy? Do imperfections in capital markets serve as barriers to entry? If so, do financial barriers to entry have an effect on the competitive structure and performance of industry? This chapter addresses these questions by analyzing the cases of Brazil and Mexico during their first major periods of banking and financial market reform: the years 1880 to 1930. It is organized as follows. The first section compares the institutional history of financial intermediaries and textile mill financing in Brazil and Mexico. The second section assesses changes in the size and competitive structure of each country's textile industry in light of their histories of industrial finance. The third section presents estimates of total factor productivity growth. The fourth section concludes.

Keywords:   banking systems, banking reform, financial market reform, textile mill financing, textile industry, total factor productivity

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