Why should the Brazilian government act moderately?
If many countries are reacting in this way, why should the Brazilian government act moderately? The answer is again the fact that the main source of stress in the economy is the external restriction. The relatively low unemployment rate observed last year was a result of an output growth well above its potential rate for several quarters that resulted in a current account deficit of 2% of the GDP, an amount hard to be financed today. External credit is very scarce: Brazil will have to export more and import less To design policies to fight the current crisis, is necessary, in first place, to acknowledge that the external credit is very scarce and will be that way for a long period, so it will be hard to roll over the external debt and even harder to get new one to finance interest payments and imports. If this is true, Brazil will have to export more and import less goods and services. When analysts say that the trade surplus will decline they are ignoring the fundamental problem broug
