Brazilian financial wealth

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By FERNANDO NOGUEIRA DA COSTA*

Second the magazine Forbes, the concentration of wealth in the 95 richest families in Brazil reduced. Why did this phenomenon emerge in Brazil?

1.

Matheus Outeiro and Matheus Leal from the Mobility and Social Development Institute (IMDS) carried out a study of mobility at the top of the wealth pyramid based on an analysis of the lists of Forbes. This technical note aimed to analyze the mobility of the 95 richest families in Brazil between two years: 2013 and 2022.

She set out to identify differences between mobility at the top of the pyramid in Brazil, that of other developing countries such as China and India, and that of the United States. Brazil stands out as the only country in which the concentration of wealth in the first families on the list has reduced.

Between 2013 and 2022, the wealth held by top-5 Brazilian families on the list fell from around 35% to just over 25%. This result is also valid when considering the top-25 families and the concentration indices presented.

In other countries, there was an increase in the concentration of wealth at the top of the list. In India, in particular, there has been a significant increase in the concentration of wealth in top-5 families. This episode is mainly due to the greater concentration of wealth in the richest family in the country. In 2013, it held just over 10% of the wealth on the list, but in 2022 it increased to almost 20%. The two richest Indian families together accounted for 30% of income, compared to 16,7% in 2013.

China, thanks to its economic-productive dynamism in the period, presented the greatest mobility in top-95 richest families, with 62 new dynasties occupying the list between 2013 and 2022. This number was considerably higher than in the other countries analyzed.

Brazil, the second country according to the degree of mobility in top-95, there were 46 new dynasties entering this period. India and the United States showed a considerably lower degree of mobility, with only 33 and 35 new families, respectively, occupying the list of 95 between 2013 and 2022.

China and India changed little in the concentration of the 25 richest families for the period analyzed: less than 1 percentage point. While wealth in Brazil has deconcentrated at this top, from 68% to 64%, the 25 richest families in the USA absorb an even greater share, reaching 71% of the wealth of the US. top-95 in 2022 against 63% in 2013.

2.

Why did this phenomenon emerge in Brazil?

To raise explanatory hypotheses in this regard, a task not performed by the IMDS study, initially, it is prudent to analyze the source of the data. The constructed list is more concise compared to the original list provided by Forbes by reducing a comparative number (95) and linking heirs to their family dynasty.

Globally, the Forbes counted 2.640 ten-digit fortunes in 2023, down from 2.668 the previous year. In total, the planet's billionaires had US$12,2 trillion, a drop of US$500 billion compared to March 2022.

Nearly half the list became “poorer” (sic) compared to a year earlier, including Elon Musk, as he fell from first to second place after his expensive acquisition of Twitter sank Tesla shares. Bernard Arnault, chairman of luxury goods giant LVMH, took his place as the world's richest person: a first for a Frenchman.

The United States still boasted the largest number of billionaires, with 735 members of the list collectively owning $4,5 trillion. China (including Hong Kong and Macau) remained in second place, with 562 billionaires worth US$2 trillion, followed by India, with 169 billionaires worth US$675 billion.

To get daily updated net worth of all 2.640 billionaires, the Forbes selected the sample with stock prices and exchange rates as of March 10, 2023. “Values ​​a variety of assets, including private companies, real estate, art and more. It is not intended to know the private balance [DIRPF] of each billionaire”. In this way, the methodology of Forbes regarding the content of wealth, it is a “black box”, but its variations probably follow the fluctuations in New York Stock Exchange (NYSE), the New York Stock Exchange.

In the Brazilian case, the methodology of Forbes American unified the fortune of Vicky Safra and her children, placing this family in first place, with a fortune estimated at US$ 16,7 billion (R$ 84,8 billion). Second place went to Jorge Paulo Lemann, with wealth of US$15,8 billion (R$80,3 billion). Adding up the partners in the company 3G, owners of the largest brewery in the world, four appear in sixth place, together with the Safra family and the co-founder of Facebook, now in venture capital.

Next are known names in Finance (André Esteves, dynasties Moreira Salles, Villela, Bozano, Porto Seguro, Daycoval, C6, etc.), pharmaceuticals, medicines (EMS), cosmetics (such as Natura and Avon), JBS, Globo, reactionary old man from Havan, Grendene, supermarkets (GPA and Mateus), fertilizers, petrochemicals, cellulose (Suzano and others), agribusiness (such as Amaggi), Votorantim, Multiplan, etc.

Something common among them is having operations in dollars, capable of carrying out exchange rate arbitration, in the globalized economy. Of the 62 members of the ranking released in April 2022, only 51 continued to have more than US$1 billion in assets one year later. The fortune of Brazilian billionaires totaled US$ 160,4 billion (R$ 814,8 billion).

Unlike what the IMDS study says, the fortunes of billionaires are explained “by the dynamics of the business environment in each country or by the degree of freedom of individuals to negotiate and undertake”, it seems to me that their variations are due to the predominance of opinions/rumors on the stock exchange. And not in Brazil.

According to the Financial Asset Matrix, prepared by the Central Bank of Brazil, in December 2022, the stock of Gross Financial Assets (PFB) of the Brazilian economy, including assets and liabilities with non-residents, reached R$72,6 trillion, equivalent to seven times GDP. The consolidated balance, excluding intrasectoral positions (on average, around 18% of the PFB), reached R$59,3 trillion (six times GDP).

From the perspective of the national economy, gross financial assets totaled R$63,6 trillion, of which 92% were invested in the country and 8% abroad. The gross financial liabilities of the national economy reached R$67,6 trillion, 87% raised in the country and 13% from non-residents. The difference between them, with greater liabilities compared to assets throughout the series, represented the net debt owed to non-residents.

At the end of 2022, this net financial liability with the rest of the world reached R$4 trillion (40% of GDP), an increase of 19% in the year. This growth reflected the calculation, at market value, of non-resident shares in direct investment companies not listed on the stock exchange, replacing estimates with book value.

In relation to financial instruments in the PFB total, the highlight is shares and other participations: 29% of this stock in the position of December 2022. Next were debt securities (20%), loans (17%), shares in funds (16 %) and deposits (8%).

This point must be highlighted: a stock of wealth imputed at market value to large foreign owners. On Bovespa, from 2019 to 2023, the participation of foreign investors rose from 45% in 2019 to almost 55% in 2022 and 2023. That of individual investors fell from 21,4% in 2020 to 13,8% in 2023. Investors institutional remained at around 27%, financial institutions 4%, others 1%.

The total volume traded in cash shares on B3 fell from R$8 trillion in 2021 to R$7,2 trillion in 2022 and R$6 trillion in 2023. However, it must be compared with clients' investments in shares Consulting (PB), according to ANBIMA: although they increased 16% from R$560 billion in 2022 to R$648 billion in 2023, they maintained their relative share in the portfolio at 30%, considering the various funds of shares and variable income directly in shares. They bore the opportunity cost.

All of Retail had R$77 billion in equity funds and R$231 billion in shares, that is, R$309 billion was less than half of PB. It represented only 7% of its portfolio.

Finally, from the official data, we deduce that the great factor in the enrichment of Individuals (and not Brazilian dollar billionaires) was the real interest policy, for fixed income, as a substitute for monetary correction. It was implemented by the Central Bank of Brazil, since the implementation of the inflation target regime.

The average annual Selic rate from 2001 to 2023 was 12% per year against the average inflation of 6,3%, resulting in an average annual real interest rate of 5,4%. There were the cycles of 2001-2008 (16,8% versus 7%), 2009-2013 (9,6% versus 5,9%), 2014-2017 (12,2% versus 6,6%), 2018-2021 (4,9% versus 5,7%) and 2022-2023 (12,7% versus 5,1%). After the initial cycle of average annual real interest rates of 9,2%, the last one was the biggest (7,2%), above the “coup cycle” of 5,2%.

Not surprisingly, also due to greater (and easier) “banking”, provided by digital banks and fintechs, with abundant free distribution of credit cards, the number of Retail accounts rose from 144 million in 2022 to 159 million in 2023. At the beginning of this last Selic upward cycle, in March 2021, there were around 130 million. The Brazilian “people” are learning to save money, invested in fixed income, with the surplus – planned or not, that is, by “luck” – of income from work.

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/3r9xVNh]


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