usado Plans to the strikingly simple approach of suspending payments on external debts.
High inflation and large governmental budget deficits (as a proportion of GNP) have long characterized the Brazilian economy (Sola, 1993, p. 40). High rates of development, and, within development, high rates of growth, however, have also characterized the Brazilian economy.
When Ferdinand Collor was elected president of Brazil, the IMF and the governments of the developed countries had found a true economic ally who was willing to try to make Brazil kow tow to the world's international bankers (Sola, 1993, pp. 40-51). Collor's personal scandals might not have led to his impeachment if he had not been seen by the Brazilian public as a tool of international monetary interests.
The initial results of the Crusado Plan in Brazil were spectacular (Pang, 1989, pp. 123-140). The Crusado Plan encountered difficulties in 1987; however, and inflation began to soar. As a consequence, Crusado Two was brought in which unfroze some prices, raised the price of gasoline, and provided for some additional currency devaluation. The plan successfully brought inflation back into control temporarily. When difficulties began to be encountered, fears of another round of hyperinflation drove nominal interest rates up to 400 percent.
Brazil has tended to rely more on fiscal policy than monetary policy (Sola, 1993, p. 16). Reserve requirements have tended to be non existent, discount rates exceptionally high, and open market operations designed to raise more funds for the government.
The Central Bank of Brazil has "been a historical victim of a weak institutional architecture," and has long been called upon by government to provide a financial bail out for governmental institutions (Fraga, 1994, p. 69). The Central Bank of Brazil does not have the independence of action available to either the Bank of England in the United Kingdom or the Federal Res...