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Word Count: 380
It may appear strange that the problems facing the Brazilian economy effects the US as well The financial depressions of Brazil bring the wealth of the nation down in turn Brazil is the largest economy in Latin America accounting for almost half of the continents total output and it is the eighth largest economy in the world Yet it is still developing Brazil possesses major agricultural mining manufacturing and service sectors Brazils economy enlarges its presence in world markets In the late eighties and early nineties high inflation obstructed economic activity and investment So a plan was made to destroy inflationary expectations by targeting the US dollar It was called the Real Plan and it had three basic objectives 1 Keep inflation on a downward trend 2 Long-term growth in output investment employment and productivity 3 To balance social inequalities Inflation was decreased greatly but not fast enough to avoid real exchange rate gratitude during the shifting phase of the plan This gratitude meant that Brazilian goods were now more expensive relative to goods from other countries which contributed to large current account deficits However no shortage of foreign currency came about because the countrys restored interest in Brazilian markets Inflation rates stabilized and the debt crisis of the eighties faded from memory The protection of large deficits by surpluses became difficult as investors became more risky A fiscal program was established and vowing progress on a structural change In January 1999 the Brazilian Central Bank announced that the real would no longer be fitted to the US dollar This analysis helped control the decline in economic growth in 1999 that investors had expressed concerns about over the summer of 1998 Brazil maintained tight fiscal and monetary policy despite a rising currency Tight fiscal policy is when taxes are high and government spending is lower This leads to a decrease in consumption which decreases demand Monetary policy is among interest rates and the money
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