This website uses cookies to ensure you have the best experience. Learn more

Brazil Currency Devaluation Essay

4766 words - 19 pages

Introduction - History
The Spanish navigator Vicente Yáñez Pinzón was the first known European in the region now constituting Brazil. Landing near the site of present-day Recife on January 26, 1500, he subsequently drifted northward as far as the mouth of the Orinoco River. In April 1500, the Portuguese navigator Pedro Álvares Cabral also reached the coast of present-day Brazil and formally claimed the surrounding region in the name of Portugal. The territory was named Terra da Vera Cruz (Brazil Historical Setting). About a year later in 1501, an expedition under the command of the Italian navigator Amerigo Vespucci was sent to Terra da Vera Cruz by the Portuguese government. In the course of his explorations Vespucci named many capes and bays, including a bay, which he called Rio de Janeiro. He returned to Portugal with a cargo of brazilwood, and from that time forward Terra da Vera Cruz bore the name of the valuable wood Brazil (Brazil Historical Setting).
In 1530 the Portuguese king John III initiated a program of systematic Brazilian colonization. As a first step the king divided Brazil into 15 districts and granted each of the districts, in eternity, to a person prominent at the Portuguese court. The grantees, known as “donatarios”, were vested with extraordinary powers over their domains. Because of the dangers implied in the French depredations along the Brazilian coast, King John revoked most of the powers held by the donatarios and placed Brazil under the rule of a governor-general. The first governor-general, Thomé de Souza, arrived in Brazil in 1549, organized a central government, with the newly founded city of Salvador, or Bahia, as his capital, instituted across-the-board administrative and judicial reforms, and established a coastal defense system (Brazil Historical Setting). Large numbers of slaves were brought into the region from Africa to overcome the shortage of laborers. São Paulo, in the south, was founded in 1554. In 1555 the French founded a colony on the shores of Rio de Janeiro Bay. The Portuguese destroyed the French colony in 1560, and in 1567 they established on its site the city of Rio de Janeiro.
Natural Resources
Brazil is the largest country in South America. Approximately 2.3 million square kilometers, 27 percent of Brazil’s total area of 8.5 million square kilometers can be considered forest. Brazil's forests comprise 17 percent of the world's remaining frontiers, making it the third highest ranked country in terms of remaining frontier forest. Brazil has the third largest block of remaining frontier forest in the world and ranks first in plant biodiversity among frontier forest nations. The Brazilian Amazon provides more timber than any other tropical forest on the planet. Over 28 million m3/year come principally from Pará, Mato Grosso and Rondônia states. The majority of the wood stays in Brazil (86 percent), and 20 percent of that supplies the markets in São Paulo state (Brazil’s Forests in Brief). Among...

Find Another Essay On Brazil Currency Devaluation

Brazil Cultural Vignette Essay

1557 words - 6 pages economy of Brazil is one of massive proportions and is dominated by the natural resources found in the country. As one of the world's top five producers of aluminum, steel, iron ore, oranges, sugar, soya, beef, and many other products, Brazil has an enormous power in world trade talks. Before the huge devaluation of its currency in 1999, Brazil had the fifth largest economy in the world, however, is currently ranked around 12th. As a speculative

Argentina: The Collapse of the Currency Board

2045 words - 9 pages losses in its international trade terms, was feeling the effects of the Brazilian real devaluation, and was facing a strong U.S. dollar and increasing spreads on emerging markets (Gurtner, 2004). The currency board had seemingly confined the country into its restrictive policies, with no apparent exit in sight (Gurtner, 2004). By all accounts, the currency board had forced Argentina to enter into a downward spiral. In the early 2000s

The Economic Impact of the Mexican Peso Crisis

1617 words - 6 pages intentionally devaluate the Mexican Peso. However, the aim for the devaluation was just gradually in order to make the country competitive in the international business environment (Bhagwati, 8). The main factor that made the decision contribute to the Mexican Peso Crisis was that it was not properly handled as was necessary. The handling of the lifting of the currency controls was not effective at the political level or political aspect, such that

The Limits to Macroeconomic Policy

1454 words - 6 pages and facilitated an inflow of foreign capital. Although economic well-being was restored, this static system became antiquated during the East Asia financial crisis. Although Argentina was not initially impacted it became a contagion of Brazil, when Brazil’s currency dropped in value. This economic change in Brazil suddenly made Argentinian exports undesirable due to cost. As a result Argentina developed a large account balance deficit at 4

How yuan can boost India growth

901 words - 4 pages "This is the way the new world begins Not with a bang but a whimper." (With apologies to T S Eliot)The long-awaited change in the Chinese currency, the yuan, happened on Thursday. Not over the weekend, when all markets would have been closed, but just an hour before the US market opens. Subtle.The amount of the revaluation, 2 per cent, was of a magnitude that would not affect the price of anything, let alone tomatoes.Estimates of the

Pizza Hut in Brazil

2122 words - 8 pages , devaluation of the currency, rising interest rates, real wage reduction and a widening federal deficit. At this point Brazil was not very attractive for foreign investors. From 1985 through 1990 the government "focused on foreign debt, inflation, and exchange rate policies." Over the 1980s, Real per capita income fell 6% over the 1980s. Brazil is known for having one of the highest inflation, but the rate it achieved in the 1980s was incredible


2096 words - 8 pages Real. The crisis in Brazil spread into Argentina because Argentine exports decreased and import from Brazil increase. Goods were more affordable in Brazil than in Argentina. This year Argentina is suffering from recession and lack of liquidity. Unemployment estimated in 16 % is rising because businesses are closing down. Presidential elections held in October 24, 1999 also added more financial insecurity this year. The currency board is committed

An Overview of the Argentine Financial Crisis

1929 words - 8 pages the period from 1995 to 1999. In 1999, Brazil devalued its currency as a result of financial crisis, hurting Argentine exports, 30% of which were traded with Brazil (Hornbeck, 2002). The U.S. dollar—with peso pegged to it—continued to strengthen relative to other currencies, including the Japanese yen, and Southeast Asian currencies after the crises in 1997 and 1998. Because Argentina could not devalue its currency from the high exchange rate to

Cry for Argentina

2292 words - 9 pages 1990s during the global economic slowdown. After the slowdown, the US dollar value increased and Argentina's neighbor, Brazil, had currency devaluation. The devaluation of the Brazilian currency reduced the competitiveness between the two countries so Argentinean economy became uncompetitive. In 2001 a serious foreign investments were needed but not present. With no growth, unemployment increased. Tax increases and budget cuts brought economy

Foreign Investment Decision December 19, 2006

4417 words - 18 pages we found, we felt that Brazil would not be a good choice to expand our manufacturing company. Brazil's economy was severely affected by the devaluation of the real (Brazilian currency) in 1999. This devaluation occurred after Brazil's central-bank governor resigned in January of 1999, his successor allowed the country's currency to devalue 8% against the dollar. At that time it was believed that Brazil would gain from the cheaper currency because

The Return of Depression Economics

1251 words - 5 pages , thus there is no such thing as equilibrium.In July of 1997, Thailand devalued its currency the baht, and started a devaluation landslide swallowing much of Asia. In years past, Thailand built its economy by the thrift and savings of its own citizens. That changed in the 1980's when foreign firms began building manufacturing plants. More money poured in during the 1990's as investors were looking for growth, and saw Thailand as a haven for

Similar Essays

The Real Stabilization Plan Of Brazil

1752 words - 7 pages Brazil faced many struggles with its currency throughout the last half century, eventually changing its currency five times before reaching what most would argue was their best stabilization plan. The stabilization plan that Brazil concluded with and is currently practicing is known as the Real. Each of the five currencies mentioned lasted at most three years, however since the creation of the Real Plan, the Real has been used for over twenty

Economy Of Brazil Essay

1470 words - 6 pages seriously promoting the sales of state assets in the early 1990s. The Government is a champion of privatization and 1998 saw the most revenue yet from the program. It is predicted that privatization will stay on course for the foreseeable future, although revenue will fall. (8) The alarmist reports coming out of Brazil following the devaluation gave pause to many investors, but many Brazilians argued that the crisis was less dramatic than foreign

Exchange Rate In Brazil. Essay

5918 words - 24 pages government to let float the real and provoked a panic in January 1999. One month later, the Brazilian currency was worth 2,15 for one dollar in comparison to 1,20 in January. Situation was alarming and Brazil seemed going straight to bankrupt. The panic reaction due to the currency devaluation would have provoked high inflation and recession. Taking in account Brazil economic history formerly presented, the inflationist threat was strong. Expected

Crisis In Argentina Essay

1715 words - 7 pages growth in technology caused the U.S. dollar to appreciate relative to other currencies as money flooded into the U.S. economy. As the U.S. dollar appreciated so did the peso, raising the price of Argentine exports and making foreign imports cheaper. In 1999 Brazil devalued its currency and Argentina could no longer export successfully to its most important trading partner. The devaluation prompted many investors to move to Brazil where labour costs