The Plano Real or Real Plan intended to stabilize the domestic currency in nominal terms after a string of failed plans to control inflation. It created the (Unit of Real Value), which served as a key step to the implementation of the current currency, the real. At first, most academics tended not to believe that the Plan could succeed. Stephen Kanitz was the first public intellectual to predict the future success of the Real Plan.
to promote rapid economic growth and international competitiveness as a backdrop to achieve social development
By doing so, the country was able to keep inflation under control for several years. In addition, the high interest rates attracted enough foreign capital to finance the current account deficit and increased the country’s international reserves.
the government’s determination to pursue tight fiscal policy that it actually succeeded in surpassing the primary fiscal surplus it had pledged to the IMF
T I Early 1950 M 1957-62 E 1974-80 1968-73 L I N E 1945-47 1840 -1930 1822 Late 19301500 1700 1807 Early 1930
1500 Colonized by Portugal Sugar first major export product. Cattle industry developed 1700 Precious metals discovered. 1807 Napoleon occupied Portugal
1822 Independence achieved. Population – 3.9 million Coffee accounted for 19% of total exports in 1821-30 which increased to 63% in 1891. Year Decadal coffee exports (1000 bags each of 60 kg) 1821-30 3178 1831-40 10430 1841-50 18367 1851-60 27339 1861-70 29103 1871-80 32569 1881-90 51631 Source: Prada Junior, Historia, p.160
1840-1930 Tariffs increased reaching an average of over 30% in 1844. Rubber exports rose from an annual average of 6000 tons in 1870s to 21000 tons in 1890s. Cotton exports rose by 73% in 1850-1900. Irregular expansion of light industries. Average yearly growth of industrial output fell from 4.6% in 1911-20 to 3% in 1920-29.
Early 1930 Exports fell from US$445.9 mn in 1929 to US$180.6 mn in 1932. Decline in coffee economy and an an excess capacity of coffee production created in the 1920s. Terms of trade fell by 50%. Value of imports to decline from US$416.6mn in 1929 to US$108.1 mn in 1932. Change in the role of government Late 1930 Output increased Steel capacity grew with appearance of small firms but there was little industrial and infrastructure investment.
1945-1947 Trade liberalization was short-lived. Industrial production grew at an annual rate of 5.4% in 1939-45. In 1945, No quantitative restrictions on imports and forex freely available for most capital transactions. Early 1950 the government adopted an explicit policy of import-substitution industrialization. in 1953 a more flexible, multiple-exchange-rate system was introduced. Imports and most exports were retained in the official market and controlled by the CEXIM (export-import dept of the Banco do Brazil)
1957-1962 government enacted the Tariff Law of 1957. Advalorem tariffs increased to 150%. the average annual rate of growth of the GDP exceeded 7%. the structure of the manufacturing sector experienced considerable change. In 1962, phase of intense import substitution, especially of consumer goods, with basic industries growing at significant but lower rates.
1968-1973 the average annual rate of growth of GDP jumped to 11.1%, led by industry with a 13.1% average. personal income became more concentrated and regional disparities became greater. Brazil suffered drastic reductions in its terms of trade as a result of the 1973 oil shock. the price of petroleum quadrupled . Country’s import bill rose and trade balance changed from a slight surplus to a deficit. Current account deficit increased. the rate of inflation had declined steadily Government expenditure as a proportion of GDP increased from 17.1% in 1947 to 22.5% in 1973.
1974-1980 In 1979, a economic package was introduced which included maxi-devaluation of the currency by 30%, elimination of tax incentives and export subsidies among others. Between 1974 and 1980, the average annual rate of growth of real GDP reached 6.9 percent and that of industry, 7.2 percent. The foreign debt rose from US$6.4 billion in 1963 to nearly US$54 billion in 1980. Since 1973, a upward trend of inflation began. The rate more than doubled from 1973 to 1974, and was in the 30-48% range in the next 4 years. It doubled again in 1978-79 and crossed the 100% mark in 1980.
Socio economic policies six key policy goals price stability efficiency of the taxation System provision of long-term finance investment in research and development education of the workforce selective investments in infrastructure
enacted a series of contractionary fiscal and monetary policies restricting its expenses raising interest rates
Govt’s macroeconomic policies achieved through tight controls of growth in expenditures Vigor in generating revenues Throughout the first half of 2003 interest rates were kept at very high levels as the Lula government continued its policy of reassuring the international community.
Discovery of Tupi oilfields. The discoveries have made Brazil one of the worlds top 10 oil producers.
Brazil has become the sixth-largest economy in the world. The economy grew at 2.7% last year. The Brazilian economy is now worth 2.5 trillion dollars (£1.6 tn).
In 2010 the Brazilian economy expanded by 7.5%.While it slowed to expected growth of 3.5% in 2011, this was caused by external factors, primarily the financial crisis in the Eurozone hitting the wider economy. The currency, Brazilian real, fell 11% against the US dollar last year. That is after two years of huge gains - up 5% in 2010 and 34% in 2009.
However, the country still struggles with inequality. The countrys Gini coefficient, a measure of income inequality, peaked at 0.61 in 1990 - but 2010s figure was a historic low of 0.53. There has been a rise of a new middle class, whose purchasing power has been fuelling Brazils continuous economic growth amid declining industrial output and weak global economic activity
The country’s interest rates are among the world’s highest for a large economy. Currently Brazil is changing this policy and has cut its interest rates seven times in the past year to a record low of 9%. With substantial oil and gas reserves continuing to be discovered off Brazils coast in recent years, the country is now the worlds ninth largest oil producer, and the government wishes to ultimately enter the top 5. Brazil is today the world’s third-largest exporter of agricultural goods.
MACROECONOMIC INDICATORSGDP (current US$) - 2.4 trillion dollarsIncome level - Upper middle incomePer Capita Income – US$ 11,500Exchange rate - 1 Brazil real (BRL) = 0.492053 U.S.dollars or 1 USD = 2.032 BRLCurrent interest rates – 8.5%Inflation rate – 4.92%Population – 195 million
References http://www.mapsofworld.com/brazil/economy/history. html http://www.bbportuguese.com/economic-history-of- brazil.html The Brazilian Economy by Werner Baer http://data.worldbank.orgWorld Bank data 2012 http://www.oecdobserver.org/news/archivestory.php/ai d/1582/Brazil_92s_Economy.html http://www.bbc.co.uk/news/business http://www.business.illinois.edu/Working_Papers/pape rs/05-0108.pdf