Brazil Fight a Real Battle

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Brazil overtook United Kingdom as the 7th largest world economy

With over 8,000 airports, Brazil has the 2sd highest number of airport in the world

Accumulated inflation at the year end of 1989 was as high as 1,782.9%

É o jeitinho brasileiro
‘’It’s the Brazilian way’’

Brazil overtook United Kingdom as the 7th largest world economy

With over 8,000 airports, Brazil has the 2sd highest number of airport in the world

Accumulated inflation at the year end of 1989 was as high as 1,782.9%

É o jeitinho brasileiro
‘’It’s the Brazilian way’’

Brazil overtook United Kingdom as the 7th largest world economy

With over 8,000 airports, Brazil has the 2sd highest number of airport in the world

Accumulated inflation at the year end of 1989 was as high as 1,782.9%

É o jeitinho brasileiro
‘’It’s the Brazilian way’’

Brazil overtook United Kingdom as the 7th largest world economy

With over 8,000 airports, Brazil has the 2sd highest number of airport in the world

Accumulated inflation at the year end of 1989 was as high as 1,782.9%

É o jeitinho brasileiro
‘’It’s the Brazilian way’’

IBUS 370
FALL 2012

IBUS 370
FALL 2012

Brazil Fights a Real Battle

Brazil Fights a Real Battle

John Molson School of Business presents

John Molson School of Business presents

BRAZIL TIME-LINE

1889Republic is established
* Central govt. controlled by coffee investment
* Govt. give more freedom to private firm + eased credit + inflation rose + currency deppreciated. 1906Coffee account for 60% of export.
* Coffee price drop worldwide (over production) – financial crisis 1926New York Stock Market Crash
- Coffee, Rubber, Cocoa, Cotton, Sugar demand drop (which are a big part of Brazil export) 1942Cruzeiro ( 1st nation currency) lauch
1945Creation of Sumoc ( Pre-Central Bank)
- Fixe interest rate + control exchange rate+ % of reserve requirement ,etc. 1964Creation of the Central Bank (Banco Central do Brazil) 1966FGTS created (Guarantee Funds for Employement time)- to ease layoff 1967New Cruzeiro ( imposed by military govt. )- in attemp to stop inflation 1968Economic Miracle – GDP growth 10% per year

(did not reduce social iniquity)
1973 Brazil began to show trade deficit
* Import 80% of oil used and oil prices 4 time higher
(Yom Kippur War)
1986Cruzado Plan
- Froze wages, price of products & services
- Producer lost profits
- consumer had to live with shortage & poor quality product - Plan ended a year after implementation ( price , inflation ) 1987Moratorium & Bresser Plan
- Payment of debts to foreign banks & foreign debt suspended
-Froze price for 90 days.
- Inflation not controlled, reach over 300%
1989Summer Plan/ New Cruzado
- First direct presidential election since 1960
- Froze price + wages + financial assets
- Plan shloud credit growth + Brazil financial reserve
- Inflation increased ( close year accumulated at 1,782.9% )
- Big loss of profitability in saving account
- Situation became unrealistic – plan failed
1990Collar plan 1 & 2
- bloked savings +deposit in overnight funds + privativize firms
- import tarrif reduced ( increased import product consumption) 1991Mercosul formation
- Brazil, Argentina, Uruguay, Paraguay signed Asunciòn Treaty 1994Real Plan (Unit of Real Value (URV) parity with US dollar ) 1. How does Brazil hope to control its currentaccount deficit through a tight monetary policy? What alternatives are available to control Brazil’s current-account deficit? One big change made by the tigh monetary policy adopted by Brazil is that the balance of payment will no longer be adjusted through trade policies (eg. tarrif), import controls and export incentives. It will now manage his trade flow using exchange rate. Brazil want’s to rise his real...
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