Chapter 9: Stabilization Policies and Regional Development in Brazil
Alexandre Rands Barros 9.1 INTRODUCTION Brazil has had a long history of inflation and, consequently, of stabilization policies. Since the period when the King came to live in Brazil and the country became a United Kingdom with Portugal, in 1808, inflation has been a frequent problem disturbing local economic life. Obviously, there was always fluctuation of inflation: in some periods it was higher, while it reached lower levels in others. Nevertheless, inflation was always an important feature of the Brazilian economic scene.1 Many stabilization policies were pursued along this long inflationary history. More orthodox strategies were part of many momentary recipes to control inflation, but also many heterodox plans were not only conceived but also implemented. A consequence of such varied experiments was that inflation and gross domestic product (GDP) growth have oscillated through Brazil’s history. Inflation reached more than 1000 percent a year in some months and has been below 2 percent on an annual rate in other months. GDP has grown over 14 percent in some years and has contracted in others. The results of such policies have varied a lot, as have their effectiveness concerning social and economic costs. This is a consequence of the wellknown trade-off between inflation and economic growth.2 Some stabilization plans had a very small negative impact on GDP and were successful in controlling inflation, at least for some time. Others had very high negative impacts on economic growth and very little ability to control inflation. Of course, there were also many stabilization...
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