Tempest-tossed but floating

Article Abstract:

The future of Brazil's economy remains uncertain, despite the government's decision to float the currency. It is clear that a detailed fiscal policy will now be required if inflation and instability are not to emerge once more. However, the political situation could act as a barrier to fiscal reform. Against this background, the government will have to use very high interest rates to control the economy. Some observers believe that it will be possible to undertake a controlled devaluation, although the currency could be negatively affected by conflict in Congress over fiscal austerity.

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Cardoso's reform puzzle

Article Abstract:

Brazilian president, Fernando Henrique Cardoso, aims to gain support for economic reforms prior to municipal elections scheduled for Oct 2000. These reforms include a fiscal responsiblity law, and tax and pension reforms. Labor reform may have to be postponed, though the fiscal responsibility law has greater chance of success. Labor laws tend to be ignored, so there is less rigidity in the labor market than might first appear. A constitutional amendment is needed for the planned pension reform.

Tax reform, Fiscal policy

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Downdraught

Article Abstract:

The value of the Brazilian currency, the real, has fluctuated considerably since the government decided to float it in early Jan 1999. Financial markets do not seem to believe that the value of the real has stopped falling, and the Central Bank is finding it hard to sell its bonds in its domestic markets. The government hopes that its fiscal programme will revive confidence in the currency, and that a floating exchange rate will lead to cuts in the country's extremely high interest rates.

Prices and rates, Foreign exchange, Foreign exchange rates, Monetary policy

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