etary Fund, 2001). The term "tradable goods" was not otherwise defined, but presumably meant some class of capital goods, since the index that included these goods rose at a higher rate both years than the consumer price index. In January of 2001, the consumer price index had risen only by 0.57 percent, the lowest January inflation rate since the IPCA index was started more than 20 years ago (International Monetary Fund, 2001).
The Letter of Intent was also cautiously optimistic about Brazil's foreign debt. "External accounts continued to improve in 2000, albeit at a pace slower than initially projected," from $6.6 billion (US) in 1998 and $1.3 billion in 1999 to $0.7 billion in 2000. Exports had risen sharply, by 11 percent overall and 17 percent for manufactured goods. However, imports grew more quickly, by 13 percent overall and 24.5 percent for intermediate or capital goods. Thus, the Letter of Intent admitted,
The terms of trade improved by only 3 percent from the depressed level of 1999. During JanuaryBFebruary 2001, the trade balance recorded a US$399 million deficit, reflecting a continued rise in intermediate and capital good imports, and continued pressures from oil prices (International Monetary Fund, 2001).
Brazil's struggles with inflation and foreign debt are not new. As early as 1955, inflation in Brazil was at an annual rate of 15 percent. This increased through the late 1950s and early 1960s until it reached 80 percent in 1964 (Bevilaqua and Garcia, no date). The stress and tensions created by this growing inflation were one of the factors that led in 1962 to a military coup. Brazil would remain under military rule until 1985 (Asset International, 1992).
However, the military junta was not more successful than previous civilian governments in curbing inflation. Instead, the junta used public debt to fund various development projects, producing continuing inflationary pressure (Bevi...