|5/12/99: Brazil's Central Bank lowers interest rate to 27%. Economy grows 1% in first quarter, led by agricultural exports. Unemployment in Sao Paolo, Brazil's richest city, is 20%.
4/16/99: Brazil still teetering, but not falling. Budget deficit has risen to 14% of GDP since currency float, up from 8% at end of 1998. But inflation has slowed, and Brazil is preparing to sell $3.75 billion in dollar-denominated bonds, returning to global debt markets for first time since Russian default last summer. Fraga has lowered Central Bank interest rate from 45% to 34%.
3/5/99: Currency down 40% since early January float. Fraga raises interest rates to 45% to fight inflation. Harvard's Jeffrey Sachs thinks rates should be cut to 20% to spur job growth and slow rising internal debt burden . (NYT, 3/5/99, p. C4)
2/19/99 Brazil officially in recession for first time in six years, after two consecutive quarterly drops in Gross Deomestic Product (GDP). Bloomberg survey of 10 economists predicts 4.1% contraction in 1999.
Former aide to George Soros, Arminio Fraga, appointed new Central Bank president
2/4/99: Currency down 30% since early January. Reserves are down to ~$26 billion, currently declining at a rate of ~$1/2 billion/day.
1/18/99: Brazil floats its currency: "When currencies float, economies sink" (NYT, 1/2/99, Era May End For Floating Currencies by Joseph Kahn)
1/13/99: Brazil devalues currency by 8%. Director of Central Bank resigns.
$1.2 billion of reserves left country yesterday.
1/6/99: Governor of Minas Gerais announces 3 month moratorium on $13.5 billion debt owed to the central government.
Brazil's states owe their federal government about $40 billion in payments due this year. (NYT, de Goes, 1/14/99) Central government service on foreign debt will amount to about $50 billion in the next year.
12/3/98: Brazilian panic over? Not quite.
President Cardosa wins reelection, proposes measures to reduce the domestic deficit, which is ~7% of GDP.
Industrial nations to provide contingency fund of $42 billion to protect the world's ninth largest economy. But bailout has risks.
Government hopes to speed sale of Petrobras and Banco do Brasil:"Despite financial turmoil, foreign corporations still express great interest in purchasing strategic concerns from the Brazilian government." (ING Barings, 9/18/98)
9/20: Unemployment in Sao Paolo, the heart of Brazil's modern economy, is 19%. Reserves outflow has slowed in recent days to under $500 million per day. Interbank loan rate doubles to 49.75%.
9/10/98: Stock market plunges 16%.
9/9/98 JP Morgan estimates economy will shrink 2% this year. Those predicting growth peg it at under 2%.
Interest rates are down from 41% last fall, when extraordinarily high returns were used to defend currency. But now they are rising again.
9/5/98: Average of $1.3 Billion/day since 9/1 estimated to have been spent defending Real, which may to be ~10-20% overvalued.