434.4 Steps towards an understanding of financialization's impact on Brazilian cities

Friday, August 3, 2012: 9:45 AM
Faculty of Economics, TBA
Oral Presentation
Daniel SANFELICI , Departamento de Geografia, Universidade de São Paulo, Sao Paulo, Brazil
An unprecedented connection with financial markets has characterized Brazil’s real estate markets in the recent years, as a range of institutional and regulatory reforms have been implemented with the aim of turning the urban built environment into something closer to a financial asset. One side of these developments has been the possibility of securitizing mortgage debts by standardizing contracts and protecting lenders from default risks. The state’s role in promoting a market for mortgage-backed securities in Brazil is undeniable, even though the market itself is still incipient when compared to other countries. But the other, and equally important side of the picture, has been the growing (and unprecedented) number of large developers issuing stocks and bonds in Brazil’s stock exchange from 2005 on. This paper aims to discuss some of the consequences of this process by looking, first, at how access to financial markets has allowed real estate developers to expand vigorously in the past five to ten years, opening new branches and establishing joint ventures in major metropolitan areas across the country. Secondly, we attempt to understand how this increased interpenetration of financial and real estate markets has promoted huge changes in major cities in Brazil by encouraging large-scale developments such as multifunctional projects and gated communities. A key theoretical conclusion seems to be reasonable in the light of this study: as finance has flooded the real estate circuit with return-seeking money, developers have engaged in ambitious, and sometimes risky, ventures to increase their revenues and boost their profits in order to please their shareholders. The recent property boom in Brazil has been, therefore, mostly beneficial to financial investors, especially foreign-based. This is consistent with theories that have been dealing with the financialization of the capitalist economy.