Was there an alternative to the Brazilian crisis?

Abstract

ABSTRACT In difference from Asia, high interest rates and stable exchange rates associated with the Real Plan did not produce a corporate debt deflation because of the low corporate indebtedness in Brazil. Instead high interest rates caused both the foreign and fiscal balances to deteriorate, reducing confidence. Any attempt to reduce interest rates brought the threat of currency weakness and the risk of inflation. The crisis was due to the reliance on high interest rates to attract capital flows which were insufficient to produce investment which gave a satisfactory rate of growth.

Keywords

• Financial crises
• capital flows
• Plano Real
• globalization