The real stabilization plan of brazil essay

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The real stabilization plan of brazil essay

This fantastic figure is not an estimative; it was calculated by Joelmir Beting, a well respected Brazilian journalist, based on the official inflation numbers. The original report was published by Veja in Dec.

The answer is obviously very complex, but a few reasons are known. First of all, the inflation was very convenient to the government; the Mint printed money around the clock, at a very low cost to the Treasury the Treasury was collecting an inflationary tax ; the Budget was fixed in nominal values, which were corroded very quickly, leaving the government with a carte blanche to spend the budget; by delaying payments to suppliers, to servants, to people who won demands in Justicethe government was in fact getting discounts.

Last, there was the natural difficulty in understanding and combating inflation in a complex country like Brazil: Untilinflation was fought mostly by following the Economics books.

The real stabilization plan of brazil essay

The President assigned all citizens with the job to control prices in every shop in the country; TV showed supermarkets being closed and managers being arrested, because prices had been raised. The Plan worked fine for a few months in November ofthe Party of the President won elections in all the Brazilian Statesbut natural sequels soon appeared: Late inright after the elections, the government came with Plano Cruzado II, with a general increse of prices and taxes.

From througha few other heterodox Plans were deployed. Inthe Bresser Plan named after the Minister of Finances again froze prices and salaries, besides cutting budgetary investments; outcome: Inthe wildest plan of all, the Collor Plan.

Inthe sequel: Plan Collor II; besides the usual prices freezing, this plan attacked the indexation: Brazilians would not believe in any Plan which would impose price freezing ; likewise, it was clear that the fiscal deficits were a major component of inflation, and despite all political difficulties envolved, the deficits would have to be addressed.

More and more it was clear that indexation was a major component of Brazilian inflation. Indexation means that every buyer or seller knew what the recent inflation rates had been, and would factor that index into their prices, contributing to increase the future inflation.

Obviously, the analysis of this phenomenon is not close to being so simple; Brazilian economists Persio Arida and Andre Lara Resende were the first to translate the idea into the written papers; the MIT economist Rudger Dornbush endorsed the ideas, and published them on one of his books about Macroeconomy.

Fernando Henrique Cardoso became Minister of Finances; mr. Cardoso called several of his academic friends to help him devise a new plan to defeat inflation; Lara and Arida were some of the main mentors of what would eventually become the Real Plan.

Another proeminent character in the deployment of the Plan was mr. Gustavo Franco; while Lara and Arida never hode their discomfort with the political practices, Franco, who would become Director and President of the Central Bank, showed much more impetus to argue with politicians and implement his ideas.

In the words of Franco, the Real Plan was founded on three key elements: In brief, what the Real Plan proposed was: The Constitutional Amendment mentioned was the 17, approved on November 22ndwhich changed the articles 71 and 72 of the Temporary Constitutional Provisionsto extend the period of the Social Emergency Fund.

Such fund was comprised of a few taxes see art. The "other reforms enacted through a prolongued period of time" referred to the legal reforms approved and attempted during the two terms of President Cardoso; mr. Cardoso managed to privatize many State owned companies including banks, steel plants, one of the largest mining companies in the worldall the telecommunication companies and others - also worthy mention, the monopoly of Petrobras was broken and also promoted significant changes in the civil service and in the social security of the private sector; other Reforms were attempted but failed: From the previous plans, a lesson was learned: The idea behind the Real Plan was to create an index, called URV Unidade Real de Valor - Real Unity of Valuewith daily variations, pegged to the dollar; prices would still raise in Cruzeiros Reais, but as the URV would also raise daily, the prices would be fairly constant in URVs as much as they would in dollars ; all economic agents would be encouraged to quote their prices both in Cruzeiros Reais which would be effected by the high inflation rates and in URVs which, pegged to the dollar, would remain pretty stable.

Because all economic agents had had enough time to realign their prices, there was not unbalances among them; by creating a super-index the URVthe government managed to beat indexation.

Gustavo Franco was and still is a firm believer in free market and free trade, even at the cost of some companies failing and some people loosing jobs in Brazil in the long term, the theory says, other companies would flourish and other people would find better jobs.Archives and past articles from the Philadelphia Inquirer, Philadelphia Daily News, and This paper documents the sources of data used in the construction of the estimates of the Levy Institute Measure of Economic Wellbeing (LIMEW) for the years , , , , , , , , , , , and The $1, handset, which was released just a year ago, 'may experience touch issues due to a component failure' Apple says.

It comes just weeks after Apple admitted it could start throttling the handsets if their batteries degrade. ABSTRACT.

Finsbury | Global Strategic Communications – Our People

For over years grave fears have been expressed concerning the earth’s capacity to cope with an exponential population growth. It is obvious that the calamitous famines and widespread starvation repeatedly forecast over the last years, have never eventuated.

The Plano Real ("Real Plan", in English) was a set of measures taken to stabilize the Brazilian economy in , during the presidency of Itamar Franco. Its architects were led by the Minister of Finance and succeeding president Fernando Henrique Cardoso.

The real stabilization plan of brazil essay

ESSAYS IN INTERNATIONAL FINANCE THE REAL PLAN AND THE EXCHANGE RATE The author wishes to thank the Research Department (Depec) of the Banco Central political economy surrounding the stabilization and reform process in Brazil during the last few years.

The precise nature of the structural.

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