Factors that have enabled Brazil to become a rapidly developing economy.

3622 Words Nov 3rd, 2013 15 Pages
INTRODUCTION

Brazil is the largest country in the South American continent, and it is amongst the 12 largest economies of the world. It possesses vast natural resources and offers remarkable ecological diversity, majority of its 192 million inhabitants now live in urban areas (Griffiths, A and Wall, S. p 609). The country also possesses a diversified industrial and agricultural sector and In 2001, the contribution of the agricultural sector to GDP was 9.3%, while that for industry and services was 33.9% and 56.8% respectively (Pereira, L 2004).
At around the same time, Jim O’Neill, the head of global economic research at Goldman Sachs, coined the acronym “BRICs” to refer to Brazil, Russia, India, and China, the emerging market
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Although the price stabilization represents the incontestable success of the Real Plan, it again fails when we look at Brazil’s economic activity and the performance of the real from 1994 - 2000, where the average growth rate of GDP was only 3.0% per year, very similar to the average growth rate of GDP of Brazilian economy in the 1980s which was 2.9% per year (Williams, S 2011) . The poor performance of GDP during the period of real can be explained by the fact that the Real Plan was created as a stabilization plan without proposing any strategy for medium and long run development.

3. ASIAN CONTAGION OF 1997-1998

By the end of 1996, the use of the overvalued exchange rate and the high interest rates were straining economic stability – the trade deficit was worsening, public sector debt was increasing while the economy was fairly stagnant (Ferrari-Filho, F. 2001). The Asian crisis of 1997 and the aftermath of the Russian crisis of August 1998 resulted in a speculative attack on Brazil’s currency (the real) this despite it tackling the Mexican Tequila crisis (1994 - 1995)

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