Chapter 6: The costs of neomonetarism: the Brazilian economy in the 1990s
Alfredo Saad-Filho and Lecio Morais* INTRODUCTION At the turn of the millennium, the Brazilian economy was the largest in Latin America, and one of the ten largest in the world. It was also one of the fastest growing economies in the second half of the twentieth century. Between 1949 and 1980, annual GDP growth in Brazil averaged 7.3 per cent (3.8 per cent per capita). This impressive performance deteriorated sharply after 1980, while inﬂation rates accelerated almost relentlessly, from under 20 per cent in 1972 to around 5000 per cent (annual rate) in mid-1994. After several failed stabilization attempts, the ‘Real Plan’ successfully reduced annual inﬂation rates to less than 10 per cent. However, the elimination of high inﬂation did not lead to the resumption of rapid growth. In fact, in the 1990s the Brazilian economy had the worst economic performance on record. Whereas in 1981–89 (the so-called ‘lost decade’) Brazilian annual average GDP growth was 2.0 per cent, in the 1990s these rates were only 1.7 per cent (per capita growth rates were approximately zero in both decades, due to the rapid decline in the population growth rate). In spite of the poor performance of most aggregate indicators, in the 1990s the Brazilian economy experienced more substantial changes than in any decade in the post-war period. The most important change was the abandonment of import-substituting industrialization (ISI). ISI, and the corresponding industrial structure, were replaced by another system of accumulation based on the microeconomic integration...
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