Brazil

Abstract

Abstract In Brazil, Latin America’s largest economy, offshore financial services have a deep impact on state power. They affect Brazilian state power through both sides of the balance sheet—taxation and money creation. Yet, it is offshore banking that is more consequential. In Brazil, offshore finance has become an integral part of the domestic cycle of money, tax, and debt. Starting in the 1960s, offshore banking largely replaced onshore money creation. Offshore banking enhanced state power by providing access to preferential liquidity. It helped finance Brazil’s ‘economic miracle’ in the late 1960s–1970s and boosted growth in the late 1990s and early 2000s. Yet, offshore banking also undermined state power during Latin America’s 1982 crisis. Following this economic and political fallout, the Brazilian state built defensive measures against offshore finance. It protected its tax base through a mix of domestic and international measures. And it effectively mitigated the risks of offshore banking through regulation and central bank interventions. Brazilian state power became resilient towards offshore finance. Nevertheless, given the structural dependence on offshore banking, and the level of corruption it enables, offshore finance remains a double-edged sword for the Brazilian state.