Has Brazilian stabilisation really improved economic performance?
E. Amann and W. Baer, The Illusion of Stability, WD, Oct. 2000 N. Reinhardt and W. Peres, Latin Americas New Economic Model, WD, Sept. 2000 Amann and Baer discuss Brazils program of stabilisation introduced by the finance minister, Cardoso in 1993. They give a detailed account of Brazils economy, using many statistical examples and tables. Reinhardt and Peres cover the New Economic Model (NEM) used in Latin America and the Caribbean. They analysis the impact of its reforms and at the macro- and microeconomic level, covering the region as a whole with few direct references toward Brazil. Therefore, the paper reviewed here will concentrate on the work of the former. Amann and Baer discuss the initial success of eliminating inflation through the Real Plan (Plano Real), the stabilisation program that used the exchange rate to keep inflation under control. This lead to problems caused by overvaluation, which failed to be dealt with through strong fiscal adjustment, which collapsed the Real
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