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A Narrow Escape
From Recession ? 

By Deena Zaidl

ll Brazil has ever sullered l*'rom a linancial turmoil it was mo...
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Brazil- A Narrow Escape from Recession


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If Brazil has ever suffered from a financial turmoil, it was more of a contagion effect due to 1997 Asian Crisis and 1998 Russian Crisis. It has been considered one of the strongest emerging markets and a large contributor towards global growth. However, things started looking a bit hazy for Brazil since 2008 financial crisis. It was observed that a country that could be a potential contributor to global growth could also pose an equal threat to global financial stability. But before we reach any conclusion for 2014, it is important to look back as to how Brazil evolved as a country and stood strong even when everything around her was in financial turmoil.

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Brazil- A Narrow Escape from Recession

  1. 1. BRAZIL A Narrow Escape From Recession ? By Deena Zaidl ll Brazil has ever sullered l*'rom a linancial turmoil it was more oi a contagion ellect due to i997 Asian Crisis and i998 Russian Crisis. lt as heen considered one or the stronges emerging markets and a large contrihutor towards glohal growth. However, things started lookin a hit hazy lor Brazil since 2008 linancial crisis. it was ohserved that a country that could he a potential contrihutor to lohal growth could also ose an equal threat to glohal linancial stahility. But helore we reacln any conclusion lor 20l‘l', ' it is important to look hack as to how Brazil evolved as a country and stood strong even when everything around her was in linancial turmoil. The Slorg So Far. .. Brazil went through industrialization process which led to expansion oi some very important sectors like automohile, petrochemical and to steel. Earl An increase in interest rates across the world Forced Brazil to S implement strict economic adjustments that eventually led to ne ative growth rates. Capital inllows were suspended making it dilficult liar Brazil to invest. Se°°”‘l Puhlic Finances were allected resulting in inllation. Brazil was quick hall 01" enough to take stringent actions whic were monetary stahilization, whic included the end olindexation and Freezing olal prices. Raised douhts ahout Brazil's im ort suhstitution model and helped E A r I ll 0 Brazil to open doors lor tra e liheralization, privatization and estahlishment oi legal and structural lramework to promote Foreign investment. The Brazilian economy hecame a mess. Shrunk in three out o the previous six years. lnllation had not dipped he ow l00% a year since i982; it peaked at a wlonmg 2.477% in 1993. The Real Plan or The Plano Real Whal‘was The Real Plan? lntroduction oi Real Plan to hrin Z galancing'”1eBugget_ downginllation hy Brazilian government. S stahilization plan that woud replace the 9- "De-in¢lex"tl1e economy -tln5 currency then in use hy the Real. lhe plan 3! meant most cgntracts were was successlul and managed to achieve E C0nVe, ,Ftefl to Units 0! feel reduction in prices. This ended the three- Val“ (UR! /3)» ”‘3l‘9‘kel'9"e year inllation that Brazil suliered From. The life mogef that SEN“! °"ll' as 3 end oi inllation hrought a lot ol good news [_ um O accoun 5' l'or Brazil some oiwhich were: increased purchasing 3"! improvement in increased power oi lower layer 5; ; . income economic oi population distrihution growth Signilicant reduction in poverty Restoring the currency value u o Braziljoined WTO and aholished state monopolies, reduced trade harriers in goods and services as well as suhsidies. o o A period oi occurrence oi series oi linancial crisis. Russian Crisis led to signilicant losses oi reserves lor Brazil 0 o Aitermath ollggli Russian crisis ended the lloating olthe Real in l999. Brazil received its lirst surplus with exports growing steadily especially in aircralt and telecommunications sector. The 2lsl‘Cenliirg for Brazil Brazil mm/ ea towanys be”? one or the Credit markets were slowly expanding and largest economies by naming GDP hanking and capital markets are steadily getting more and more diversilied. ln many Brazilians joined the Brazil became the middle class and were lilted From poverty. W0r| A‘S Sqxth largest economy Wieilcs 4- il: r.: l:". §l? .i: E.: §:: i.: .iE. ':: l.¢li: fi.: fr'1'(l£E'6Einae: ;'3°S: ftSh' Ayrircaan ' ”SS'a' the ellicient layout oi the Real Plan that helped I the avoidance oi systemic crisis. had hit Brazilian econom despite raised many ol contradiction that it he strong questions againstgrazil macroeconomic lundamentals. Slow economic growth, corrupt political But the growin deht oi Brazil raised system and constant government some issues wit the arrival ol intervention became Leyisgnes linancial crisis. I I - I - I I - I I I . I I I I . - I - I . - I - I I - I . I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I soon, saw Brazilsrecover Nationwide rotests highlighted the corrupt saw Brazils hest economic perlormance system oi: razil and how the juclicia was ln25years— ineiiicient and suhjected to politicarl' and economic inlluence. 2014 - A Narrow Escape from Recession This unimpressive picture oi Brazil From made many economists question ahout the economic ireedom that was the hasic lundamental right oi ever human to control his or her own lahor and r0 erty. Brazil started to leel the altershocks a ain with the lirst hall? -year hrought technical recession in Brazfi. Unlike though, economists say the prohlems lacing Brazilian consumers now are mostly domestic. lamilies that horrowed to help linance a recent consumption hoom are now struggling to ay down their deht in an environment oi sticky inllation and some oltlle world s highest interest rates. But the good news to man is that Brazil has heen there and done that and even ilthe escape in was a narrow one, it won t he surprisin to see Latin America s largest economy returning hack to its good olfi glorious days in however corruption led hy strong political inlluence on thejudicial system still remains an unnoticed issue! References http: //siteresources. wor| dbank. org/ INTMAC RO/ Resources/ BaigGo| dfajn. pdf http: //www. heritageorgfindex/ about http: //www. corbettreport. com/ putting-the-b-in-brics-brazil-in-the-21st-century/ http: //www. b|oomberg. com/ news/2014-01-24/contagion-spreads-in-emerging-markets-as-crises- grow. html http: //b| ogs. ft. com/ beyond-brics/ tag/ brazi| -economy/ http: //online. wsj. com/ articles/ brazils-fiscal-picture-improves-but-stiII-shy-of-early-expectations- 1417188451 ? tesla= y&mg= reno64-wsj http: //www. te| egraph. co. uk/ sponsored/ rbth/ politics/1 1263625/g20—summit—brics-challenge-g7.html http: //online. wsj. com/ articles/ brazils-economy—c| aws-out—of-recession—gdp—up—0-1-on-quarter- 1417174556?KEYWORDS= braziI http: //www. economonitor. com/ blog/2008/10/the-impact-of-the-global-financial-crisis-on-brazil/ http: //ya| eg| oba| .yale. ed u/ content/ reverse-coupling http: //www. cairn. info/ revue-journal-of-innovation-economics-2010-2-page-77.htm http: //www. economist. com/ blogs/ americasview/2014/07/real-plan 0 2014 Deena Zaidi. 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