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This article provides information about How the New Economic Planning and Government Policies Changing Brazilian Economy?
In the governmental realm, Brazil is the third largest democracy. It has had civilian democratic rule since the end of the military dictatorship. After the “economic miracle” period (1967-74), Brazil entered a “stagflation” phase concurrent with political liberalisation.
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During the military period, Brazilian society had become 70% urban; the economy had become industrialised, and more manufactured goods than primary goods were exported; and about 55% of the population had registered to vote. Foreign policy oscillated between alignment with the United States and pragmatic independence.
A transition to a civilian president took place in 1985. From 1985 to 1997, Brazil experienced four distinct political models: a return to the pre-1964 tradition of political bargaining, clientelism, and economic nationalism under Jose Sarney (president during 1985-90); neo-social liberalism with economic modernisation under Fernando Collor de Mello (president during 1990-92); an erratic personal style of social nationalism under Itamar Franco (president during 1992-94); and a consensus-style social-democratic and neo-liberal coalition under Fernando Henrique Cardoso (president during 1995-2002).
Cardoso was ascended as president on January 1, 1995. The transition to the new government was nearly perfect. President Cardoso was re-elected in 1998 for a second four-year term. During his two mandates, President Cardoso drove important reforms, both in economic and social field. Perhaps the most important task of the Cardoso government in 1995 was to promote the reform of key sections of the 1988 constitution in order to reduce the role of the state in the economy, reform the federal bureaucracy, reorganise the social security system, rework federalist relationships, overhaul the complicated tax system, and effect electoral and party reforms to strengthen the representation of political parties.
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The economic plan established in 1994 (Piano Real) marked an important turning point in the Brazilian economy. It was successful in massively reducing inflation and paved the way for progress in other fields. Low inflation in turn helped to ensure significant economic growth during the first four years of the Piano Real. From 1994 to 1997, the economy grew at an average annual rate of 3.5% and thousands of new jobs were created. The pattern of growth in the economy decreased as a consequence of the crisis in the global economy of recent years. Even so, the growth of 2.3% per annum between 1994 and 1999 was significantly higher than that achieved before 1994.
Brazil overcome the financial crisis of the 1999-2000 and from 2001 -03 real wages fell and Brazil’s economy grew, on average, only 1.1% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic programme put in place by former President Cardoso and strengthened by the present President Lula Da Silva who was elected in 2002. He undertook to build many of the reforms initiated since 1994.
The three pillars of the economic programme are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, which have been reinforced by a series of IMF programmes. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment. In 2003, Brazil ran a record trade surplus and recorded the first current account surplus since 1992. While economic management has been good, there remain important economic vulnerabilities.
The most significant are debt-related: the government’s largely domestic debt increased steadily from 1994 to 2003, straining government finances, while Brazil’s foreign debt (a mix of private and public debt) is large in relation to Brazil’s modest (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable.
But the economic front of Brazil seems to be more optimistic when we look into the recent economic turnaround following a dismal 2003 when the economy shrank by 0.2 per cent to a record exports and a stronger currency resulted in 5.3 per cent growth for the Brazilian economy in 2004, the best in a decade.