Brazil: Leading the Bric's

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Executive Summary Brazil is the largest economy in Latin America and has a population of 192 million people. In 2010 Brazil’s GDP was 2.1 trillion with an annual growth rate of 7.5%. Challenges The real has appreciated steadily since 2003. The entry of foreign capital in the Brazilian market is one of the main reasons for the steady appreciation of the Brazilian currency. Inflation expectations have risen, and, given the carryover from late 2010, year-on-year inflation has surpassed the ceiling of the official monetary target since June. The national development bank (BNDES) was created to resolve a market failure. This liquidity injection was helpful in avoiding a credit crunch during the crisis but risks…show more content…
Despite these pro-industrialization projects Brazil remained dependent on agricultural exports. When in the 1950’s Brazil experienced a significant balance of payments crisis, Vargas took his own life. In 1955 the government, led by Juscelino Kubitschek, continued its policies of state-run industrialization. This included its building of infrastructure like the new capital city of Brasilia. Aggressive growth during this time fueled the need for imports and so worsened the balance of payments. Inflation jumped from 25% to 100% by 1964. In 1964 a military coup mandated domestic savings, liberalized financial markets, and provided subsidized loans to domestic industries. All of this resulted in a 10% annual growth of Gross Domestic Product (GDP). In 1982 this all ended when inflation increased drastically. To combat this, the government raised interest rates and cut spending, plunging Brazil into the worst recession in its history. The recession led to the collapse of the military regime and in 1985 a democracy was established. Throughout the 1980’s Brazil’s government tried to restart economic growth in the country but was unable to get inflation under control. By 1990 inflation had risen to over 1000%, the Gini coefficient was above 0.6 and over a third of the population had fallen below the poverty line, all with an increasing crime rate. In 1992 a new finance minister was appointed and he introduced the Plano Real. This plan
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