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  • Essay / Economy: Inflation in Brazil - 754

    Brazil, an expanding economy in the global market, is known as one of the South American countries with well-developed agricultural, mining, manufacturing and service sectors . This thriving economy is experiencing slow but sure economic growth (World Fact Book). They have achieved and maintained single-digit inflation rates over the past ten years, with the lowest recorded at 2.6 in 2003 and the highest at 6.9 in 2005 (World Fact Book). Brazil's ultimate goal is to keep the inflation rate below 6%. In macroeconomics, national income, inflation and unemployment go hand in hand, from a monetarist point of view, the variation in money supply will have an effect on unemployment, inflation and the fluctuation of national income (Robinson Rojas 2014). Monetarist views are found in the Brazilian economy since the change in the money supply had an effect on that economy as early as 1986. To combat high inflation rates, Brazil changed its currency several times between 1986 and 1995 until the deployment of Real. Plan (Travel to Brazil). The Real Plan developed by Finance Minister Fernando Henrique Cardoso, Brazilian economist Persio Arida and Andre Lara Resende with MIT Rudger Dornbush endorsing the idea by publishing it in his macroeconomics book (Brazil Travel) was the beginning of stable inflation. extremely high unemployment rate and the start of extremely high unemployment rates in Brazil's growing economy with fluctuating national income. Inflation has many components, in Brazil indexation was considered the reason for high inflation rates, that is why the plan was introduced, due to the rates of a period Before sellers assumed that rates may be the same and take this index into account in their prices, rates have remained higher and sometimes higher due to this assumption. The plan's success was based on three key elements: 1) fiscal strategy, 2) monetary reform, and 3) opening the economy (trips to Brazil). These strategies have had positive and negative results for Brazil's economy and population. The budgetary strategy, based on constitutional amendment No. 17 approved on November 22, 1997, modifying articles 71 and 72 of the temporary constitutional provisions in order to extend the duration of the Emergency Social Fund, was to be used for economic and social purposes . Among the many positives of this strategy, the reform of public sector social security and labor legislation, among others, failed..