Morris

In 1950, the inflation rate was 9.2%; by 1964, it had increased to 89.9%. The rise of inflation over these fourteen years caused the devaluation of Brazil's currency, which weakened the economy and highlighted the government's inability to stabilize its own currency. Additionally, President Kubitschek increased the national debt by approximately $1.5 billion because of the 1957 Brasília project that moved the capital from Rio de Janeiro towards the center of the country and renamed it Brasília. This change was made in order to encourage westward movement, however, the government lacked the funds to complete the project without greatly increasing the national debt. Despite increased national debt from radically attempting to grow the economy, in 1964 Brazil’s president, João Goulart, announced reforms aimed to aid the poor. The Basic Reforms involved agricultural, financial, electoral and educational reforms to allow Brazil to move progress forward. However, the military grew worried with the reform because land would be redistributed throughout the country in order to decrease the wealth gap, a plan that many leftist nations took in order to equalize

After FDI inflows falling to only 345million in 1986 due to lack of confidence in Brazil’s ability to repay foreign debt, Brazil’s economic situation has been consistently improving as the government strategies for industrialisation were restructured with a movement more to funding industrialisation through FDI rather than borrowing from Foreign markets.

An example of the IMF’s ability to promote strong, stable economies is the case of Jordan. In the 1980s the declining oil prices and the related recessions in the Middle Eastern oil exporting countries was disadvantageous to Jordan. In 1989 Jordan had a 30-35 percent unemployment rate and was having a hard time due to their external debt. This led the authorities to request the country’s first arrangement with the IMF. Economic reforms were a part of the agreement between Jordan and the IMF. Jordan agreed to a series of five year reforms financed by the IMF, therefore the government took on huge reforms prioritizing foreign investment and easier trade policies. They were ultimately able to reduce the overall debt payment up to a manageable level. Jordan is currently regarded as a country by which the effectiveness of the IMF assistance is assessed.

Brazil has seen its share of economic downturn in the past century. Brazil’s economy has gained strength since. In 90’s many economic reforms were put in place including tax reform, privatization, deregulation, strict fiscal policy, trade liberalization and a structural and legal framework was set up to attract foreign investment. Introduction of new currency the Real, in 1994 helped cut inflation. Market reforms turned Brazil to become an open economy and began growing again in 2009. Access to most sectors is generally favorable through imports, local production or joint ventures.

According to this approach, in order to get IMF loans, any assisted country should go through reforms focused on the three major pillars of fiscal austerity, privatization and liberalization (Stiglitz, 2002, p. 53). During all the 90s, Argentina's economic policies were under the strict control of a supporting program established by IMF (IEO of IMF, 2003), so during the deep crisis happened between 1998 and 2002, IMF was already in charge with its approach. Throughout all this period, Argentina strictly applied the IMF formula and realized a number of structural reforms, "reducing budget and balance of payment deficits, raising interest rates, reducing inflation, privatizing state assets, and reducing trade barriers and regulation on capital flows in and out of the country" (Paddock, 2002, p. 158). This program did not produce the results expected by IMF. Instead, it produced recession and a strong dependence of Argentina's government on IMF loans to support its growing debt (Paddock, 2002). Primary economic and social indicators clearly show the sufferings of Argentina during that period: between 1998 and 2002, GDP passed from 292 billion dollars to 97 billion dollars (The World Bank, 2017), while unemployment grew from to 12.8% to 19.6% (The World Bank, 2017). Argentina stepped out of the crisis only after defaulting and devaluating, i.e. after

For More than two decades Brazil suffered badly from high inflation, economic decline, domestic and foreign debt. In 1993 country’s Inflation reached 30 percent a month and as a result the country wouldn’t sustain growth. After many unsuccessful plans to control the inflation, finally Real Plan of Fernando Henrique Cardoso, minister of finance, worked out and brought the inflation down to a single digit.

3. Part of the reason the World Bank’s standard Structural Adjustment Policies has been counterproductive partially because of unfortunate timing. Reduce government spending caused a recessionary effect, decreasing demand and increasing unemployment hurt nations. Strict monetary policy raised interest rates and helped to further suffocate investment demand and access to capital for poor farmers and low-income entrepreneurs. Currency devaluation did make exports cheaper but at a time when export markets for primary goods were oversupplied and prices were falling. Import cost also rose making it more expensive for domestic producers to obtain new technology and replacement parts. In addition, privatization of government enterprises also increased efficiency, which was accompanied by downsizing, which resulted in unemployment for thousands of the middle class. At this time the reductions in

As per CIA handbook, “Since 2003, Brazil has steadily improved macroeconomic stability, building up foreign reserves, reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments, adhering to an inflation target, and committing to fiscal responsibility. In 2008, Brazil became a net external creditor and two ratings agencies awarded investment grade status to its debt. After record growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in September 2008. Brazil's currency and its stock market - Bovespa - saw large swings as foreign investors pulled resources out of Brazil. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to begin a recovery. Consumer and investor confidence revived and GDP growth returned to positive in the second quarter, 2009. The Central Bank expects growth of 5% for 2010.”

As demonstrated above, Brazil has created a trend in rising GDP since 2003 by steadily improving their macroeconomic stability (Central Intelligence Agency, 2012). Analysis of the rises or decreases in real GDP are the most accurate method to determine the state of a nation’s economy. The rises in Brazil’s real GDP demonstrate that this country currently has a healthy, thriving economy. In addition, an accurate analysis of the nation’s current, past, and projected GDP provides policy makers with a basis for determining economic and fiscal policies. Currently, Brazil’s President Dilma Rousseff has indicated her intention of continuing the former economic policies, including sound fiscal management due to the economic growth during the former President Lula’s administration (U.S. Dept. of State, 2011). As an example of Brazil’s thriving real GDP; according to The World Bank, the nominal GDP (represented in U.S. dollars) for the year 2010 was $2,087,889,553,822 (The World Bank Group, 2012). As an economic principle, “both real and nominal GDP increase during an

In 1994, the world saw the decline of the Mexican Peso, leading to what is now considered as the Mexican Peso Crisis. The crisis was characterized by the drastic decline in the value of the Mexican Peso. The Mexican Peso Crisis is considered significant because of its impact on other parts of the region, including Brazil. The following is a discussion of the causes and impact of the Mexican Peso Crisis.

In order to prevent the current crisis from deepening, immediate actions are required from the major industrial countries and from the international community. There is evidence that the world economy is experiencing a major slowdown, which may deepen if inadequately managed. For example, Japan is in its worst recession since the war, much of East and South-East Asia is in depression, Russia is experiencing a major downturn, growth has stalled in Latin America, and the prices of primary commodities and a number of manufactures are falling in international markets. Authorities in the industrial countries must nonetheless continue to be alert. Several downside risks still remain, and current policies may prove insufficient to prevent the world economy from slipping into recession. Expansionary fiscal policies may be required in other industrial economies, in addition to Japan. It is also crucial that the rules of an open international trading system should operate smoothly, allowing the economies that face adjustment to reduce their deficits or generate trade surpluses with the more vigorous industrial economies.

During this time period the IMF took on a new role of lending to countries on the brink of default. By the mid 1980s, some observers noted that the loan qualifying austerity policies implemented by many borrowers were prolonging and deepening the debtor nations’ problems.

Moreover, the collapsed Bretton Woods system was accompanied by the reemergence of international capital markets and an increase in the activity of international commercial banks. With decreased demand for loan in high-income countries, interest rate decreased and banks sought new borrowers. Meanwhile,in less developing countries growth rates was fairly satisfactory. According to FDIC ( 1997,pp 192), before tho oil price shocks which will explained later, for more than a decade, the real domestic product growth rate of the developing countries averaged 6 percent and for remainder year slowed to 4-5 percent. Such growth generated investment from international banks in these markets.

Because Brazil imports many products (for example Refined and crude petroleum, cars and wheat flour), internal price of gasoline and bread for instance went up, affecting directly the consumer price index and so increasing the inflationary pressure which aggravated even more the scenario of pre-crisis.

International banks have made risky loans all over the world because they knew that if trouble arose, the fund would step in to resolve the situation – as it has done in the past. The IMF has played a critical role in many of the epochal events in the 1990’s. The IMF lent 18 billion dollars to Mexico in 1994, after the peso collapsed. It gave Russia over 10 billion dollars in 1999. The IMF has helped drive inflation from 1,000 percent a year down to a tolerable 10 percent a year, thanks to Russia listening to what the IMF said and doing as they suggested. It has given Indonesia 10 billion dollars, and has helped Indonesia demonopolize industries. It gave 4 billion to Thailand, which was the epicenter of the East Asian Crisis. The IMF helped closed dozens of reckless banks. True, the IMF did many little things wrong, however, it did the important ones right. The Philippines is a prime example on how effectively the IMF can work. For years, Filipinos suffered the weaknesses of economic and business policies. Under the tutelage of the International Monetary Fund for nearly 30 years, and especially during the past decade, they faced up to their problems. Many sectors of their society suffered greatly, and some complained loudly. However, they persisted and, with the help of the IMF and the courage of the Philippine people, they exited from the IMF program. How did they do this? They assembled one of the best economic