Presented at UT Dallas for the Management Honors Program International Business class on 11/2/10. This is a brief overview of the economic history of Brazil, including the amazing story of conquering hyperinflation and then the incredible rebound of the economy over the past 15 years.

1. http://www.flickr.com/photos/11118948@N00/173169697/
The Fake Currency
That Saved a Nation

2. Marcelo Somers
Media Product Manager
Sabre Holdings
@marcelosomers

3. why am i here?

5. that’s actually my cousin...

6. Fake Money Saved Brazil...

7. in the late 80s,
Brazil had a bit of a problem

8. the inflation rate hit 80%...
per month!
that means if eggs cost $1, they’ll cost $2 a month later.
a year later, they’ll cost $1,000

9. grocery shopping wasn’t much fun...
• A freezer became your best friend
• Prices changed throughout the day
• Products would disappear

10. there were a few perks...

11. 0
750
1500
2250
3000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
ConsumerPriceIndex
http://www.indexmundi.com/brazil/inflation_rate_(consumer_prices).html

12. 0
750
1500
2250
3000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
ConsumerPriceIndex
http://www.indexmundi.com/brazil/inflation_rate_(consumer_prices).html
huh?

13. Attempt #1 - 1986
the cruzado plan
- General price freeze
- Wage readjustment and freeze
- Readjustment and freeze on rents and mortgage payments
- A ban on indexation
- A freeze on the exchange rate

14. Attempt #1 - 1986
the cruzado plan
- General price freeze
- Wage readjustment and freeze
- Readjustment and freeze on rents and mortgage payments
- A ban on indexation
- A freeze on the exchange rate
Failed

15. Attempt #2 - 1987
the bresser plan

16. Attempt #2 - 1987
the bresser plan
Failed

17. Attempt #3 - 1989
the summer plan

18. Attempt #3 - 1989
the summer plan
Failed

19. Attempt #4 - 1990
the collor de mello plan

20. Attempt #4 - 1990
the collor de mello plan
this one actually sounded pretty good...
- Removed restrictions on free enterprise
- Increased competition
- Privatized public enterprises
- Boosted productivity

21. Attempt #4 - 1990
the collor de mello plan
this one actually sounded pretty good...
- Removed restrictions on free enterprise
- Increased competition
- Privatized public enterprises
- Boosted productivity
Failed

22. lesson learned...
you can’t centrally plan an economy

23. Hurray Free Markets!
http://3.bp.blogspot.com/_x1Xe0kyzOQs/TEZsxx1XYoI/AAAAAAAAAaQ/6qFENwk98FA/s1600/simex3a.jpg

24. what can a
government
control?

25. what can a
government
control?
fiscal policy
monetary policy

26. Quick Economics 101 Reminder...
Monetary Policy: the process by which the monetary authority of a
country controls the supply of money, often targeting a rate of interest to
attain a set of objectives oriented towards the growth and stability of the
economy.
- Open Market Operations
- Discount Rate
- Reserve Requirements
Fiscal Policy: the use of government expenditure and revenue collection
to influence the economy.

27. Plano Real
4 drinking buddies who created a fake
currency and saved an economy.

28. hardly your average drinking buddies...
Gustavo Franco - PhD Economics, Harvard
Pérsia Arida - MIT Economics
Edmar Bacha - First Brazilian to receive a PhD in
Economics @ Harvard
Pedro Malan - PhD Berkley

29. You have to slow down the
creation of money. But, just as
important, you have to stabilize
people's faith in money itself.
People have to be tricked into
thinking money will hold its
value.”
‘‘
http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil

30. Unidade Real de Valor
(Real Value Unit)
the fake currency

31. July 1, 1994

32. modern-day
Brazil

33. Fernando Henrique Cardoso
President, 1995 - 2003
Privatization of enterprises
http://www.scielo.br/scielo.php?pid=S0034-71402005000200001&script=sci_arttext
‘‘
The results indicate that these companies became more efficient after
privatization. In particular there was an increase in profitability and
operational efficiency. Apparently, the loss of financial support from the
state has a major impact on the financial structure of companies, we
observed an increase of current liquidity and a reduction in long-term
debt. ”

34. embraer
modern globality

35. http://en.wikipedia.org/wiki/File:Lula_-_foto_oficial05012007_edit.jpg
Luiz Inácio Lula da Silva
President, 2003 - 2010

36. Bolsa Familía
(family allowance)

37. provides a monthly allowance
to families whose children are
vaccinated and attend school
Bolsa Familía

38. For families with per-capita income below R$140/month:
R$22 ($12) per child attending school (max 3)
+ R$68 for families with per-capita income below R$68/
month
Bolsa Familía

39. Poverty
27.7% decline during Lula’s first term

40. Bolsa Familía
does it really work?
my opinion...

41. 2010 Elections
vs
Dilma Rousseff
Worker’s Party (PT)
José Serra
Brazilian Social Democracy
The Results

42. Final thoughts on Brazil...
• Censorship
• Communism/Marxism
• De-Privatizing Companies

43. Final thoughts on Brazil...
• Amazing investment growth
• Taxation Meter (increase in taxes 3 months ahead)

44. Can Brazil continue its amazing success?

45. One more thing...

46. the forever recession

47. questions?

48. thanks!@marcelosomers
blog.marcelosomers.com
slideshare.net/msomers