"The Real
Plan", instituted in the spring of 1994, sought to break
inflationary expectations by pegging the real to the US dollar.
Inflation was brought down to single digit annual figures, but not
fast enough to avoid substantial real exchange rate appreciation
during the transition phase of the "Real Plan". This appreciation
meant that Brazilian goods were now more expensive relative to goods
from other countries, which contributed to large current account
deficits. However, no shortage of foreign currency ensued because of
the financial community's renewed interest in Brazilian markets as
inflation rates stabilized and the debt crisis of the eighties faded
from memory. The maintenance of large current account deficits via
capital account surpluses became problematic as investors became
more risk averse to emerging market exposure as a consequence of the
Asian financial crisis in 1997 and the Russian bond default in
August 1998. After crafting a fiscal adjustment program and pledging
progress on structural reform, Brazil received a $41.5 billion
IMF-led international support program in November 1998. In January
1999, the Brazilian Central Bank announced that the real would no
longer be pegged to the US dollar. This devaluation helped moderate
the downturn in economic growth in 1999 that investors had expressed
concerns about over the summer of 1998. Brazil's debt to GDP ratio
for 1999 beat the IMF target and helped reassure investors that
Brazil will maintain tight fiscal and monetary policy even with a
floating currency. The economy continued to recover in 2000, with
inflation remaining in the single digits and expected growth for
2001 of 4.5%. Foreign direct investment set a record of more than
$30 billion in 2000.

British Indian Ocean Territory:
All economic activity is
concentrated on the largest island of Diego Garcia, where joint
UK-US defense facilities are located. Construction projects and
various services needed to support the military installations are
done by military and contract employees from the UK, Mauritius, the
Philippines, and the US. There are no industrial or agricultural
activities on the islands. When the Ilois return, they plan to
reestablish sugarcane production and fishing.

British Virgin Islands:
The economy, one of the most stable and
prosperous in the Caribbean, is highly dependent on tourism, which
generat