Anjali Kumar

Access to Financial Services in Brazil

This study evaluated present levels of access to financial services in Brazil and government policies that have had an impact on access. Based on these findings, the study explored options for increasing future access to financial services in Brazil. The first section of this summary highlights the core conclusions to emerge from the study and their implications for government policy. The next section describes the findings and recommendations of each chapter, and is followed by an in-depth look at specific areas examined by the study.

Enterprise Size, Financing Patterns and Credit Constraints in Brazil: Analysis of Data from the Investment Climate Assessment Survey

Enterprise Size, Financing Patterns, and Credit Constraints in Brazil investigates the importance of firm size with respect to accessing credit. The principal findings are that size strongly affects access to credit compared to firm performance, and other factors, such as management education, location or the industrial sector to which the firm belongs. Additional findings are that the impact of size on access to credit is greater for longer term loans and that public financial institutions are more likely to lend to large firms. Finally, financial access constraints may have a less significant differential impact across firms of different sizes than other constraints, though cost of finance as a constraint is very important.

Assessing financial access in Brazil

This paper is organized as follows: Chapter 1 Introduction. Chapter 2 investigates the extent to which the supply of banking services has increased or diminished over time, and also analyzes factors underlying the spatial distribution of banking services, and the relative roles of public and private banks. Chapters 3 and 4 look at the use of financial services by urban individuals and analyze factors accounting for differentials in access-in particular the importance of regional and local differentials in access, the role of public versus private financial institutions, and the role of individual characteristics that could serve as proxies for information on creditworthiness. The final chapter summarizes the findings of this paper.

East Europe: New Holding Institutions

The need for increasing the efficiency of state-owned enterprises of the transforming economies of East Europe has been clearly acknowledged by their governments. It is equally clearly expressed by these governments today that the principal vehicle for achieving this is a change in ownership, through privatization. Gradualist solutions are not sought, because in addition to the efficiency objective, the path of privatization serves the ideological objectives of creating private property and supporting new political beliefs. There is a danger that, if the moment is not seized, and irreversible reforms are not introduced, political and social momentum for the transformation may be lost. Budgetary pressures are not the driving force and indeed revenue may be sacrificed rather than gained in order to bring about rapid change.1 Why, in such a context, should state holding institutions be examined?

Egypt: Successive Holding Structures

The focus of the development strategy of the Egyptian government since the 1952 revolution was growth through self-reliance and socialism. From 1961, the nationalization of private enterprise began and by 1965, all large establishments in agriculture, industry, trade and infrastructure were state-owned. To look after the 438 public enterprises which existed at this time, thirty nine General Organizations were created, under the aegis of sectoral ministries. The rationale for the General Organizations at this point was improved sectoral coordination and planning of industrial development. During the 1970s, there were some attempts at liberalization under an Open Door Policy and new laws were introduced to encourage private investment.1 Although most industry remained in the hands of the state, the government attempted to ease the strict and bureaucratic controls on public enterprises by abolishing the General Organizations in 1975 (Law 111) and placing the enterprises directly under the relevant ministries. A performance evaluation system was introduced at the same time to give greater autonomy to public enterprises.2

Italy: IRI and Others

Public enterprises in Italy occupy a major role in the economy accounting for around 15 per cent of the non-agricultural labor force, 20 per cent of value added and 25 per cent of fixed investments.1 Almost half of Italy’s fifty largest companies, in terms of turnover, are state owned. Apart from certain public utilities, such as electricity, where public ownership or control is prevalent in many countries, the Italian public sector controls around 70 per cent of banking and has a major presence in many industries and services (telecommunication, air and sea transport and highways, for example). A large number of these public enterprises had however been organized as private joint-stock or limited liability corporations, in which the government held the controlling interest (imprese a partecipazione statale), through three principal state-owned holding companies (SHCs) IRI (Istituto per la ricostruzione industriale), ENI (Ente nazionale idrocarburi), and EFIM (Ente partecipazioni e finanziamento industria manufatturiera).

Public Enterprise Management Through State Holding Companies

Concerns about public enterprise management, especially since the 1980s, have been closely associated with more generalized concerns about the role of the state in processes of production. Whether in specific enterprises or industries in the context of a mixed market economy, or across the entire economy, in a system of centralized planning, state owned and operated production units have been associated with economic inefficiencies leading to lower relative levels of output, a diversion of resources from their most productive uses and internal economic inefficiencies in management and motivation within the productive unit.1 A major cause of the economic inefficiencies of public enterprises is the difficulty of reconciling the multiple political, social and ideological aims of governments and government-appointed managers guiding the operations of these enterprises, with the achievement of economic efficiency. These concerns have led to the adoption of a wide spectrum of mechanisms to modify or alter the controls and obligations between governments and state owned enterprises to better achieve these multiple and sometimes conflicting objectives.

Empirical Experience: an Overview

As discussed in the first chapter, the reasons for the establishment of a state holding company can be various, and these need not be limited to, and need not include, the reasons for establishing a holding company in the private sector of a market economy. Differences in purpose and environment are closely associated with differences in structure and behaviour. Based primarily on differences in purpose, therefore, a broad categorization of holding companies from different groups of countries may be attempted. This section gives a general overview of these various forms in order to provide a perspective for the country case studies which follow. Additional notes on individual country experiences may be found in the Appendix.1