crooks and so on. I know my Brazilian compatriots well. I know that most of you are thinking that what happened in Argentina and in Uruguay will not be allowed to happen in Brazil. Most of you probably will disregard this article as just a negative bunch of boloney. Brazilians have a short memory, and many have forgotten that not long ago their bank accounts were frozen by the Fernando Color administration. Brazilians are ready for another round of that bad medicine. They have forgotten how bitter the medicine tasted at that time. Today, the majority of the Argentinean population just can wish that they could turn back time about one year, for them to take some action, when they still had the chance to move their savings to a safer country in Europe or to the United States.
Brazil's Achilles Heel When I wrote my articles about Brazil adopting the Euro as its new currency, I received many emails and letters regarding that subject. Some readers opposed my idea regarding the Brazilian currency, because in their view Brazil would be giving up its sovereignty as a country if it adopted the Euro. Since January 1999, the Brazilian Real lost over 60 percent of its value in relation to the U.S. dollar. If Brazil had adopted the Euro in January 1999, today the Brazilian GNP would be over US$ I trillion instead of the current US$ 558 billion. People don't understand how much damage has happened to the Brazilian economy because Brazil has this very weak currency, the Real. It is humiliating for Brazil when they have to crawl and go begging to the IMF in their pursuit of more money. This IMF money is very expensive to Brazil because of the strings attached to it. They have a profound impact on the country; not only economic impact but political as well. Some of the IMF requirements are that the Brazilian Central Bank keep interest rates very high—above 18 percent. Credit card rates in Brazil for Brazilian customers are calculated based on the unpaid balance of their accounts and the interest rate charged to their accounts varies from 9 percent to 12 percent rate per month. These interest rates levels are ridiculous when we take into consideration that Brazil has been operating under less than a 5 percent annual inflation rate. BRAZZIL - SEPTEMBER 2002
The country Brazil and the Brazilia population are getting poorer and poor .r by the minute. Since President Fernand Henrique Cardoso took office in 199 the Brazilian government privatized ov r US$ 100 billion worth of governme t assets. The Brazilian government has be wasting all government reserves, t e moneys received from the sale of gove ment assets, and the moneys that th have been .borrowing from the IMF this absurd effort to defend this mo 1bund currency— the Real.
The second and final optio It does not matter who becomes t e next president of Brazil—Luis Ina io Lula da Silva or Ciro Gomes—there is only one option left for the Brazili government to avoid the coming e onomic meltdown and chaos in Bra 11. The new president should have the co rage of adopting the Euro immediately as the new Brazilian currency. The benefits of such a move sho Id be immediate. The one major benefi is currency stability. Brazilians will not be afraid of losing all their savings beca se ofmajor currency devaluations. Curre cy stability would give Brazilians confide ce to repatriate to Brazil the over US$ 50 billion that they have stashed awa in Europe and in the United States to rotect these assets from currencies m Itdowns. The other major benefit is that in erest rates charged to Brazilian busine ses and to the Brazilian population woul4 go very low—it would get in line with interest rates charged in the Euro countries. Another immediate benefit would go to the companies of the Euro countries that have investments in Brazil—their currency risk would be eliminated in Brazil. Until recently, I used to believe in a completely free market economy. Tdday I know there is a place for govern rent regulations and government prote tion of its industrial base against foreign ompetition. Deregulation has been a d saster in the U.S. to the airline, the en rgy, and the telecommunications industries. For example; many airlines are oft the brink of bankruptcy in the United States. Business Week magazine of Adgust 5, 2002 reported that since the TelecommunicationsAct was passed in 996 to deregulate the telephone indus , investors have lost over US$ 2 trill' n as the stock prices tumbled 95 percent or more from their highs. The crisis ould relegate the U.S. to second-class staus in
the communications industry in the future. I used to think that governments at all levels usually wasted lots of money, and that they were a very poor allocator of resources. I used to think that the free open market system was the best allocator of resources. Today I have my doubts about unregulated and a savage and destructive type of capitalism I have seen in operation since the mid-80's. It started with the savings & loan scandals and debacle of that industry in the 1980's and culminated with the latest string of company scandals on Wall Street. I believe that the government has a role in stabilizing the economy. For years, an overvalued financial market built on misleading and false information sent highly misleading signals to investors who eventually lost trillions of valuable national savings, which were misallocated to unneeded and wasteful investments. Investors lost over US$ 2 trillion in the telecommunications industry and over US$ 1 trillion in the dot.com fiasco. These investments are gone and will have an impact on many people's retirement plans in the future, since a lot of their pension money was invested in these promising areas.
Is It That Hard to Get? Many people don't understand the idea that the Brazilian economy will be better off if Brazil adopts the Euro as its new currency, instead of continuing with the Real (which eventually will put Brazil in the poor house) or adopting the new currency the Bankrupt. I know that they can't grasp the idea but I will try one more time. The fact is that Brazil would benefit and prosper if it adopts the Euro. Let me give an actual example. In January 1999, the economies of Brazil and of California were very close in size; each economy had a gross national product (GNP) of approximately US$ 1.1 trillion. Today, California still has an economy that exceeds US$ 1.2 trillion, even though energy deregulation went out of control in California and almost bankrupted that state. California faces a budget deficit of US$ 24 billion; a figure that represents almost 30 percent of its total budget. If California were not protected by the value of the U.S. dollar, because the U.S. dollar is the currency of California, then we would have a different story. California is the largest state economy in the U.S. and the second largest is New 27