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This article provides information about the Measures Undertaken by Brazilian Government to Handle Economic Crisis and Environmental Challenges !
Despite having adhered to an economic strategy, which’ entailed an overvalued currency, high interest rates, huge capital inflows and liberalisation, Brazil has plunged into crisis towards the end of last century. There was a rapid devaluation of Brazilian currency real against US dollar. The root of the crisis can be traced to the financial policies of 1980s when import substitution growth strategy was adopted for the economic growth of the country.
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By the end of the decade the Brazilian economy was turbulent by the devaluation of its currency. Early IMF stabilisation programmes, failed to stop inflation or generate growth – indeed, they created hardship for many in the region. Later prescriptions combined more sophisticated anti- inflation policies with a growth strategy based on market liberalisation.
In 1990 President Collor ordered to freezing of bank accounts to halt inflation. Collor, who was later forced out of office on corruption charges, also scaled down the tariffs surrounding the economy and attempted to cut public spending. In 1994, Fernando Henrique Cardoso, the Brazilian Social Democratic Party (PSDB) economy minister in the next administration, introduced the “Piano Real”, with full backing from the international financial world.
It stopped hyper-inflation by anchoring the currency to the dollar and by keeping interest rates high and the exchange rate overvalued. The “inflation tax” was lifted from the shoulders of lower-income families leading to a better living standard. This success ensured Cardoso’s election to the Presidency in October 1994.
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It was widely believed that Fernando Henrique Cardoso’s victory in the Brazilian presidential election would serve to inoculate Brazil from the devaluation virus. Cardoso, architect of Brazil’s “Plan Real,” was to implement structural adjustments and economic reforms designed to satisfy the conditions set by the International Monetary Fund (IMF) for a $41.5 billion loan. Cardoso’s regime could not deliver what they promised. He was unable to get the IMF supported budget or the economic reforms the Brazilian legislature. People of Brazil were convinced that devaluation of the real was inevitable and began shifting their wealth out of Brazil and into bank and brokerage accounts in the U.S., Europe, and offshore havens.
The more dollars fled Brazil, the more negative expectations about Brazil’s future, particularly the future value of the real. The more negative the expectations, the more the capital flight. In an effort to defend the real, the Brazilian Central Bank pushed up interest rates to nearly 50%. Indeed, the high interest rates only speeded up the fall in asset prices in the Brazilian economy, reducing the collateral backing existing loans, increasing the rate and risk of bankruptcies, and placing extraordinary burdens on the entire financial system.
President Cardoso decided that the solution was devaluation of Real. He had earlier pledged not to devalue. Thus, the devaluation reinforced the negative expectations in the financial markets and community of the Brazilian well-to-do. The 9% devaluation in the real/dollar exchange rate leads to the flow of dollars out of Brazil deepening the financial crisis. Half of Brazil is covered by forests, with the largest rain-forest in the world located in the Amazon Basin. Within the delicate structure of this particular forest, which as a whole is 40% of the globe’s entire rain-forests, exists one-fifth of planetary oxygen production and one- fifth of planetary fresh water.
The Amazon is also home to one-tenth of the planet’s plant and animal population. Recent migrations into the Amazon and large-scale burning of forest areas have placed the international spotlight on Brazil. Amongst the world’s greatest environmental problems, deforestation in the Brazilian Amazon is without doubt the one which has caught the largest audience and attracted the most attention, being of concern to a large number of actors, governments, international institutions, Non- Governmental Organisations and media.
The Amazon rainforest and Pantanal (Great wetlands) of Mato Grosso are suffering from the effects of human intervention from deforestation, slash-and-burn agriculture, highway construction, illegal mining, drug trafficking and pollution. Dam building has also destroyed large swathes of rainforests. In 1992 most Brazilian states adopted an ecological value added tax.
A levy on goods, services, energy and communications, the tax is the largest source of revenue in Brazil. The ICMS-E was intended to compensate municipalities with large conservation areas for the resulting loss of revenue. Revenue from the tax is often used to maintain parks and reserves, including tool purchases and employee salaries. In some states, the tax appears to have significantly increased the number and size of protected areas. In Parana conservation areas grew by more than 1 million hectares between 1991 and 2000 – a 165% increase.
In 1992, Rio de Janeiro had been selected by the United Nations as the site for the largest global town meeting ever held, the United Nations Conference for Environment and Development (UNCED), better known as the Earth Summit. Nearly every country in the world, thousands of journalists, and even more NGOs participated in a meeting featuring some of the world’s best minds. The daunting task was to identify a blueprint for the future balancing of the conflicting priorities of the rich North and poor South.
The essence of the northern view favoured environmental integrity in the service of improved quality of life for current and future generations, which coalesced around the concept of sustainability, or long-term replicability. In sharp contrast, the South saw environmental ism as secondary to the inalienable right of poor southern hemispheric people to economic development resulting in a higher standard of living for the world’s disadvantaged.
These two divergent goals had traditionally been seen as inimical, but the approach taken at Rio was different; the Earth Summit defined environmental ism and development as potentially complementary, and around this idea was forged a rare global consensus pointing toward a new goal: sustainable development. This concept of environmentally conscious forms of development was formalised in the document that emanated from Rio ’92—called “Agenda 21” —which placed the whole world on the same page by pointing to sustainable development as the common goal for humankind’s future.
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Reaching agreement on “Agenda 21” represented a considerable achievement, but its acceptance as a political symbol could not answer whether sustainable development was, in fact, possible. It soon became apparent that while both the north and south saw enough of what each wanted in “Agenda 21” to accept its goal of sustainable development, the North focused on the sustainability component, while the South prioritised economic development for poor countries.