1 / 13

Plano Real 1994 – 2002

Plano Real 1994 – 2002. Real Plan and the end of inflation. Redemocratization and economy. Began in 1985; Unsuccessful Attempts to control inflation: Strong fiscal adjustment; Deficit financed by the Central Bank. Senator Fernando Cardoso became Finance Minister; Immediate action plan:

fauna
Download Presentation

Plano Real 1994 – 2002

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Plano Real 1994 – 2002 Real Planandtheendofinflation

  2. Redemocratization and economy • Began in 1985; • Unsuccessful Attempts to control inflation: • Strong fiscal adjustment; • Deficit financed by the Central Bank. • Senator Fernando Cardoso became Finance Minister; • Immediate action plan: • Cut in government spendind; • Effective tax collection (evasion U$ 40 – 60 Billions) • Resolve financial relations with state governments

  3. First sociologist to be President of his country

  4. The new indexing system - URV • 1 URV = 1 US$ • Official prices denominated in URV; • New currency – Real; • Price increases; • Restrictive monetary policy; • Capital inflows > Real Aprreciated

  5. Initial Impact of the Real

  6. Initial Impact of the Real • Poor people get more purchase of power; • Rising sales; • Rate of investment increased; • Positive impact on the balance sheet of enterprises • Exchange rate – Key policy instrument

  7. Exchange rate – Key policy instrument • Use of Exchange rate to maintain price stability; • Exchange rate anchor • Open the economy – declining the tariffs on imported tariffs; • Trade balance deterioration; • Mexican crisis emerge: • Devaluation of Real; • Interest rates and tariffs rise again

  8. Initial Impact of the Real Source: Banco Central do Brasil, Relatório 2011

  9. Unresolved Fiscal Dilemma • Personnel expenditures • Pension expenditures represented 43% • Other related problems: • Confidence of financial system – PROER; • Congress as a problem – political system; • Temporary decress (Medidasprovisorias) role; • IMF – 1998 – Fiscal reforms aprroved

  10. Theviciouscircle

  11. Capital flows • Multinational investements; • Buying Brazilian companies; • Building new factories; • Investing in modernization; • Growth of labor productivity;

  12. NewCrisis • Banks • Difficulties in payingdebts; • Rising in nonperformingloans; • Incentive for mergerandacquisitions; • 1998-1999 • AsianandRussiancrisis • Real wasattacked • IMF, World Bankand US Government: US$ 41.5 Billion

More Related