Brazil Confronts an Interdependent World

Timeline: Year 1807 1889 1930 1945-46 1947-62 1963 1964-84 1985 Event Kingdom of Brazil Republic Military Coup Varagas overthrown Economic progress Economic slowdown Military regime Democracy returned Impact Due to Napoleon defeating Portugal Due to coup and Pedro II being ousted Getulio Varagas was appointed as president Paved the way for democracy GDP growth averaged at 11% Led to military Regime Economy grew at 11.3% per year Foreign debt was $100 billion, a challenge for the new government

Sector wise Problems: Sector Education Problems faced School teachers were not fully qualified Quality of education was poor Countrys Educational system hampered productivity Productivity levels were low The productivity gap could be closed with improvements in labor organization and capital investments Severe drought 40 % homes did not have running water, 88% had no sewage systems Urban centers were plagued by air, water and solid waste pollution richest 20% held 60% of nations wealth Poorest 20% held 2 % of nations wealth 1 in 4 lived on less than $1 per day Severe drought Rise in Crime Policies adopted 20% federal budget spent on education Minimum expenditure per student raised from $208 to $260 per year Agriculture, Services and manufacturing were the key industries

Industry

Environment

One tenth of Amazon forest razed Population in Amazon basin grew from 6 million to 17 million

Poverty

$400 million provided to build dams and water facilities $450 million provided as credit to farmers

Vijay Krishnan A DM14257

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Brazil Confronts an Interdependent World

Industrial Development: 1964-83 (Military Regime) Problem Inflation grew annually at 88% Policy adopted Indexation of wages, rents, debts, savings, government bonds and credit Government borrowed from US banks Borrowed petrodollars from US Japanese style high tech targeting Impact It increased inflation

Insufficient tax revenues Oil price increase SOEs

Foreign debt increased Increased inflation Domestic market expanded, annual deficit halved

Economic Reform Plans: Economic Plan Cruzado plan Actions taken Froze prices for goods and services, introduced a new monetary unit called cruzado Wages and prices frozen Froze prices All financial assets were frozen De-indexation of economy Impact PCI fell by more than 6%, cumulative inflation reached 39,043,765% Devalued Cruzado by 65%, fiscal deficit soared Fiscal deficit worsened, inflation was out of control Filled government coffers by more than $1 billion Bankruptcies, Recession

Bresser Plan Summer Plan Collor Plan I Collor Plan II Cardosos Real Plan: Action Plan Combating Inflation

Attracting Investors

Privatization In-house Restructuring

Impact on Economy Cruzados translated in to URVs. 1 URV = $1 (US) checked price rise, inflation dropped down from 2600% to 50% Reduced Trade barriers and import taxes Northeast brazil had corporate income tax exemption which attracted investors Government subsidies increased, so it was cut back Telebras was auctiones and government earned $19 billion Repealed constitutional law that prohibited firing of Government employees Implemented retirement ages Pension system was reorganized

Vijay Krishnan A DM14257

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