Over the last 60 years, the Brazilian trade balance represented, on average, 1.4% of the GDP (year on year) and was not enough to cover international services (both financial and others). For the same period, the average yearly current account presented a deficit (-1.75% of the GDP per year). However, despite the Brazilian economy’s characteristic instability, the trade balance only presented a negative figure for two periods lasting longer than 4 years (as seen in Figure 1).
In the 1930s, Brazil recovered from the recession more quickly than the United States. The key to understanding what happened lies in the price fixing policy for coffee that, by guaranteeing the income levels of the plantation owners, allowed for the expansion of the manufacturing sector. During the 1920s, the government artificially maintained coffee prices by buying national production using external loans. The crash of 1929 dried up the sources of foreign financing and forced both the central government and the State of São Paulo to interrupt the scheme. Between 1928 and 1930, the price of coffee dropped almost 40% and caused the falls in export revenues and GDP. In 1931, the National Coffee Council began buying and destroying stocks.
Last week, at an OECD lecture in Paris, I heard it said that, between 1965 and 2004, the economies of the world’s wealthiest countries (the US, Japan, Germany, the UK, France, Italy and Canada) accounted for an average of 65% of the global GDP. During that 40-year period, this figure remained almost constant, varying only by approximately three percentage points for any given year. In 2007, however – surprise! The percentage share for the G7 countries in the global GDP fell to 52%, marking a decrease of 13 points. In part, this change came from the increase in commodity prices and the subsequent exchange rate appreciation experienced in exporting nations. And part of it reflected the convergence phenomenon of the 28 emerging countries that grew beyond the 3.5% per year mark established during the preceding quarter century. Does this signify a shift in the distribution of global economic power? What role will 2009 play in this process?
I never complain when an economist answers: “It depends”. Almost everything that luck throws our way comes with two aspects. Consider the introduction of the railways in Russia. In making the factories of Moscow accessible to inhabitants of Tver, Kaluga and Riazan, the railway condemned these provincial cities to decadence and turned Moscow into a […]
In 1900, not a single nation existed where all adults (men and women) enjoyed the right to vote. Today, 62% of the world’s countries classify themselves as democracies and choose their governments through relatively free elections. How did such a radical change come to pass? Well, as democracy has become synonymous with legitimacy, even dictators […]
An Italian woman has put France back in the headlines of newspapers all around the globe. She married the French President, exchanged her heels for sandals and got in the good books with the English – all in the same week that the press announced a nude photograph of her would be auctioned in New […]
Things won’t be the same tomorrow as they were yesterday. The old will be still older. Migration? More intense. Relative prices? Determined in China and India. Inequality? Greater than ever, as will resistance to globalization. But, above all, the world will change due to global warming. Scientists are warning us that the point of no […]
Between 1996 and 2006, there have been almost half a million victims of homicide in Brazil. Last week’s widely reported “Map of Violence” reveals an increase in the crime for Brazilian cities with relatively low incidences of violence before the mid 1990s, such as Florianópolis. For cities with higher incidences of violence, a small fall […]
I write this from Australia, where I am chairing a table on crime in Latin America as part of the GDN Eighth Annual Conference. According to economic theory, criminals respond to the same incentives as any other worker, comparing possible profits against the risk of being punished. In the study that Rodrigo Soares, a professor […]
The Brazilian package that increased the IOF (Tax on Financial Operations) in January of 2008 is bad, even taking into account the need for measures in order to balance the effects of the dissolution of the CPMF (Provisional Contribution on Financial Transactions). It fails to specify cuts in expenditure and is dependent on the approval […]