Brazil - First steps in a long trek
Brazil’s economy is in surprisingly good shape following last year’s devaluation. Now the challenge is to make further progress in reducing the fiscal deficit, to overhaul the tax system and make reforms in pensions, health and education. It’s a tall order and Brazil is not noted for making swift progress but the direction is broadly correct.
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This time a year ago, Brazil was teetering on the brink of disaster. The government's nightmare, a forced devaluation of the real, had come true. All the work of the previous four years seemed about to unravel, and the country faced rising inflation, unemployment and recession. Many analysts expected, at best, that the economy would shrink by 5%.
None of this happened - the economy actually grew in 1999, by 0.8%. inflation stayed low, at about 8%, and industrial production, although it slipped last year by 0.7%, is set to grow by 5% in 2000.
What went right? Pedro Malan, Finance minister, says it was a combination of factors (see interview) that, taken together, amount to Brazil's economy being more stable than most had thought. But if the worst is over, there is still a lot to be done.