Although there have been more than twelve years since high inflation was eliminated and a floating exchange rate regime was introduced in Brazil in 1999, at least two aspects have clearly marked the Brazilian economy in the 1999-2011 period: first, business cycles were characterised by stop and go behaviour, with annual average growth rates of real GDP (3.4%) much lower than the emerging and developing countries (6.0%) and very close to the global economy (3.7% — see Figure 1); and second, there was a cyclical and persistent tendency of the Brazilian currency to appreciate in real terms (Nassif, Feijó and Araújo, 2011). As well discussed by many studies1, a significant part of this poor performance can be credited, on the one hand, to the Brazilian growth model based on external saving through which growing and unsustainable current account deficits are generally reversed by overshooting of the nominal and real exchange rates and sudden stops. And on the other hand, to a very narrow and orthodox short-term macroeconomic policy which has over-pursued the goals of price stability and monetary independence compared with other equally important economic and social goals, such as a sustainable long-term growth; structural change directed to both diversify exports to sectors of higher technological intensity and prevent the economy from early deindustrialisation; the improvement of the poor physical and social infrastructure; and so on.


André Nassif

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