Vol. 8 No. 2 (1988): Apr-Jun / 1988

Vol. 8 No. 2 (1988)

Apr-Jun / 1988
Published April 1, 1988


The inflationary process in Brazil and its relations with the public sector deficit and debt
Eliana A. Cardoso
Brazilian Journal of Political Economy

This paper offers an interpretation of the Brazilian inflation and comments briefly
on the Cruzado Plan. It emphasizes two points. First, there are the problems of fiscal consolidation
in the presence of a large public debt. What is missed in many analyses of stabilization
programs is precisely the particular debt situation, and the role of foreign exchange
availability in successful versus non-successful programs. Secondly, we discuss the role of
budget deficits in the inflationary process in Brazil. Seignorage models as an explanation for inflation in Brazil are dismissed on the grounds that seignorage as a share of GDP shows absolutely
no correlation with inflation. The money-goods model of monetarism is inappropriate
for the Brazilian economy because it predicts that seignorage drives the system. But the
Brazilian experience on the contrary has to be interpreted in the light of changing sources
of financing the budget. The inflation acceleration between 1979 and 1985 is linked to the
switch from external to domestic finance, and the large trade surpluses that pushed up interest
rates and inflation. The paper develops a model that shows a pattern of adjustment for
increasing inflation induced by increasing equilibrium real interest rates, that matches the
Brazilian data. The Cruzado Plan failed to pay attention to the debt problem and the need
for budget consolidation (probably through debt relief and a capital levy). In the absence of
an integrated approach, it pushed the economy into a classic inflationary finance situation.

JEL Classification: E31; E52.

Trade and exchange rate policies in growth-oriented adjustment programs
Jeffrey D. Sachs
Brazilian Journal of Political Economy

The search for “adjustment programs oriented towards growth” is a reaction to
a generalized disagreement with the stabilization programs that the lMF recommends for indebted
nations. A new orthodoxy is emerging from this situation, which relates the recuperation
of the debtor nations to a change to development oriented to the external sector, based
on the liberalization of international trade. This article describes many important limitations
of this new orthodoxy. The strong emphasis on liberalization has no historical basis and
does not really correspond to the experiences verified in the successful Far Eastern economies.
Moreover, it diverts attention from the more urgent needs of the indebted economies.

JEL Classification: H63; F31; F34; F43.

Between accommodation and confrontation: the dilemmas of renegotiating the Brazilian external debt, 1983-1987
Edmar L. Bacha
Brazilian Journal of Political Economy

After a historical revision of the Brazilian foreign debt renegotiation procedures
from 1983 to 1987, this article discusses five controversial technical points: the spread’s
calculus and restructuring method, internal re-lending of the restructured amortizations, foreign
court’s jurisdiction, IMF monitorization, and debt equity conversion.

JEL Classification: H63; F34.

Biotechnologies, international division of labor and the Brazilian case
Bernardo Sorj, John Wilkinson
Brazilian Journal of Political Economy

This article emphasizes the contradictory impact of biotechnologies on the economic
system, both between industrialized and Third World countries and within each of
these blocs. The heterogeneous applications of biotechnology and the specific relations they
establish between industrial and natural resources lead to a multiplicity of sectoral and national
policies. Biotechnologies offer Brazil the possibility for more rational and competitive
use of its natural resources, and at the same time an increased participation in key industrial
sectors currently heavily internationalized. The key to success however depends on the ability
to transform research into industrial strategy.

JEL Classification: Q16; Q17.

The agricultural revolution in Brazil: the singularity of the development of capitalism in Brazilian agriculture, 1850-1930
Cláudio Gontijo
Brazilian Journal of Political Economy

This paper shows that the universal logic of capitalism can be identified within
the singularity of agricultural change in Brazil during the initial period of industrialization
(1889-1930), through the mediation of a particular pattern of agricultural transformation
based on large estates. The development of agriculture was marked by the process of gradual
transformation of the large estates (lafifundia) into modern capitalist enterprises, in such a
way that the Brazilian pattern could not be based on small peasant properties. As a result,
the development of capitalist relations of production and the productive forces remained
weak and was limited to industry, while the majority of the population could not improve
its poor living conditions.

JEL Classification: N56; Q10.

The balance and the debt
Antonio Barros de Castro, Francisco Eduardo Pires de Souza
Brazilian Journal of Political Economy

During approximately two and a half years the Brazilian economy sustained a
trade surplus of about USS 12 billion. The origin and sustainability of this surplus became
one of the main issues of the controversy about the medium and long-term growth perspectives
of the country. Using the latest data, and comparing 1987 with 1986, this article tries
to show that the trade surplus collapse in the second half of 1986 was an aberration, corrected
in 1987. ln the latter, the level of activities achieved in 1986 proved to be compatible
with the level of surplus sustained from 1984 to the first half of 1986. The article also tries
to explore some of the implications of the country s exceptional capacity to generate a high
surplus, ending with a brief reference to its position facing foreign debt.

JEL Classification: F134.


Growth and inequality: a critical review
Ronaldo Lamounier Locatelli
Brazilian Journal of Political Economy

This note reviews the production around inequality and income levels, trying to
understand if there is sufficient theoretical and empirical evidence to stablish such connection.

JEL Classification: O15; B22.

Notes and Comments

Financial Discipline Versus Economic Development: Does the Baker Plan End Conflict?
Robert Devlin
Brazilian Journal of Political Economy

Following the disclosure of James Baker’s plan of restructuring the external
debt of selected countries, this note reviews the history of debt renegotiation between Latin
American countries and transnational banks. It also deals with how a stabilisation plan
could be harmonic with economic growth.

JEL Classification: F34: H63.

The big problems of the international money
Michel Aglietta
Brazilian Journal of Political Economy

considering the dramatic changes in the international money market during the
1980s, this piece discusses the necessity of re-establishing the internal monetary coordination.

JEL Classification: F33; G15.

Stabilization Plan in Brazil: some lessons from the Cruzado Plan
Gustavo H. B. Franco
Brazilian Journal of Political Economy

The success of a stabilization program depends on a series of factors. The recent
experiences with “heterodox” plans are sources of important lessons for both future stabilization
attempts and for theoretical developments. This piece focuses on the lessons learned
from the Cruzado Plan.

JEL Classification: E31; E52.

The challenge of the public debt
Sílvio Rodrigues Alves
Brazilian Journal of Political Economy

As challenging as dealing with the public deficit it is to calculate it. This piece
deals with the measurement of the government savings and public sector borrowing requirements
and compares Brazil, Argentina, and Mexico statistics.

JEL Classification: H62; H68; H83.