AA 34030
telephone: (61) 321-7272
FAX: (61) 225-9136
consulate(s) general: Rio de Janeiro, Sao Paulo
consulate(s): Recife

Flag description: green with a large yellow diamond in the center
bearing a blue celestial globe with 27 white five-pointed stars (one
for each state and the Federal District) arranged in the same pattern
as the night sky over Brazil; the globe has a white equatorial band
with the motto ORDEM E PROGRESSO (Order and Progress)

@Brazil:Economy

Economy - overview: Possessing large and well-developed agricultural,
mining, manufacturing, and service sectors, Brazil's economy outweighs
that of all other South American countries and is expanding its
presence in world markets. In the late eighties and early nineties,
high inflation hindered economic activity and investment. 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 of 48% 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 is expected to push growth up to 3% in 2000.

GDP: purchasing power parity - $1.057 trill