enforceability (see Table 2). This inefficiency of the legal system is confirmed by a recent World Bank study on the efficiency of court systems in 1 1 countries.<sup>4</sup> The study shows that there are 2,975 and 3,129 cases pending per judge in Brasilia and Sao Paulo, respectively, compared to only 58 in Singapore and 244 in Hungary. The congestion rate, i.e., the ratio of caseloads to resolved cases per judge is 277% in Sao Paulo and 302% in Brasilia, compared to 111% in Singapore and 164% in Peru. The time to resolve a case, the number of cases pending at the start of the year divided by the number of cases resolved during this year, is 1.6 years for Sao Paulo and 1.9 years for Brasilia, compared to 0.04 years in Singapore and 0.5 years in Germany.

The evidence on actual bankruptcy cases in Brazil paints an even more inefficient judicial system. According to an estimate by Pinheiro and Cabral (1999), a judicial execution to recover a creditor claim can take between 1 and 10 years. Since recognition and collection of debt are adjudicated in separate proceedings, the debtor has many additional possibilities to delay payment. The inconsistent application of law due to the very limited role of binding precedent, a high degree of discretionary power for judges and the possibility of several levels of appeal up to the highest courts further undermine efficient contract enforcement in Brazil and negatively affect the resolution of credit disputes in courts.

Sharing information about borrowers is an important way for lenders to learn more about current and potential customers. It helps reduce frictions in the credit market by (i) allowing lenders a better assessment of borrowers, (ii) reducing informational rents and thereby increasing competition between lenders, and (iii) disciplining borrowers. In Brazil, there are several public and private data banks on borrowers. Most of them, however, contain only negative information about debtors that have defaulted and then only during the default period. There are no comprehensive credit record systems as in the U.S. and other countries yet. Due to the lack of positive debtor information, such as financial data, debt exposure, guarantees, etc., banks are restricted in their use of credit scoring models to in-house information about debtors. Regional fragmentation and the lack of sharing information between different institutions constitute further weaknesses in credit information sharing in Brazil.

In addition to the sharing of information, accounting standards that simplify the interpretability and comparability of firms' balance sheets and income statements are important for the development of efficient financial intermediaries.5 Information about firms is more reliable, can be more easily processed and contracts between firms and banks better enforced with better accounting standards. The Center for International Financial Analysis and Research (CIFAR) has developed an indicator based on the inclusion or omission of 90 items in companies' annual reports which allows a comparison of the quality of financial statements across countries. On this accounting standards index, Brazil (54) scores better than other Latin American countries (46)

> 4The following countries were included in the study: Brazil, Chile, Colombia, Ecuador, France, Germany, Hungary, Panama, Peru, Singapore, and Ukraine. Sao Paulo and Brasilia were listed separately. For specific results, see Dakolias (1999).

> S See Levine (1999) and Levine, Loayza, and Beck (2000).

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