Brazil: Resilience in the Face of the Global Crisis
of the crisis and the government’s policy response. We conclude by exploring Brazil’s medium-term growth prospects in the wake of the global crisis.
Pre–Global Crisis: From Price Stabilization to Strong Macroeconomic Foundations Throughout the 1990s, Brazil implemented a series of far-reaching structural reforms, including successful price stabilization policies, and developed a consistent macroeconomic policy framework designed to establish a more stable, resilient, and dynamic economy. Over time these structural reforms, combined with the consistent pursuit of sound and appropriate macroeconomic policies and supported by a generally favorable external environment, played a central role in solidifying the country’s macroeconomic foundations and bolstering its economic growth potential. The economic reforms, price stabilization, and the adoption of a consistent macroeconomic framework can be divided between two periods covering four government administrations (figure 3.1). The first period, Figure 3.1. Growth and Brazil’s Sovereign Risk, 1994–2009 real plan crawling peg and structural reforms
growth, % per year
5 Mexican crisis
4 3
fiscal adjustment, flexible exchange rate, and inflation targeting regimes Asian and Russian crises
1,600 domestic confidence crisis
1,400 global financial crisis
Sept. 11 and Argentinean crisis
2
1,200 1,000 800
1
600
0 400
–1
200
–3
0
19
94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09
–2
Cardoso I
Cardoso II
Brazil GDP growth (left axis) sovereign spreads (right axis)
Lula I
Lula II
world GDP growth (left axis)
Source: IBGE (Brazilian Institute of Geography and Statistics); World Bank; JP Morgan. Note: bps = basis points.
spreads, bps
7 6
93