Financial Crisis and Brazil Essay

The economic crisis that has swept the sphere since 2008 has wrought havoc in bailiwick economies all over the world. As a group, one of the more(prenominal) particularly hard-hit groups of nations has been the Latin American countries of Central and South America. wizard nonable exception to this trend appeargond to be the nation of brazil nut. The lugubriousnessy projections appeared not to agree to brazil. According to Mauricio Cardenas of the Brooking institute This doom and gloom has not infected brazil, however, where President Luiz Inacio Lula da Silva is showing unprecedented self-assurance. oratory in Madrid, Lula said somewhat rhetorically that this idea that marketplaces can do everything is over, and more fundamentally The times in which appear countries depended on the IMF are over. This is not Hugo Chavez speaking, however the president of Latin Americas largest frugality, who enjoys 80 portion popularity in his country. (Cardenas, 2008) Although brazil nut w devourhered the early months of the financial crisis relegate than its Latin American neighbors, the longer the crisis has continued, the more the brazilian preservation has weakened.One of the factors that prevented an fast collapse of the brazilian Economy in the wake of the 2008 Crisis was the relative lack of outside(prenominal) banks in the country. (Cardenas, 2008) Unlike m each Latin American nations that have a senior high percentage of outside banks (i. e. Mexico 80% remote banks), Brazil has only 30% abroad banks. (Cardenas, 2008) In the forgetful term, this allowed Brazil to digest that a contraction in outside impart would not have as deep an impact on their economy than that of separate nations.Brazilian banks, in times of previous economic prosperity, had built reserves, kind of than engaging in profligate loaning, stellar(a) to the hopes that these reserves were sufficient against the day that extraneous banks severely layricted credit. (Carde nas, 2008) By phratry of 2008, this theory seemed to erode in the hardihood of certain economic indicators. The Bovespa index, a market indicator similar to the Dow Jones industrial Average, muddled half of its value from May to kinsfolk of 2008.(Cardenas, 2008) 10% of that drop occurred in the scrap half of September. More strikingly, the value of Brazils currency, the Real, fell 32% against different world currencies. (Cardenas, 2008) These factors show that Brazil may still be prone to back in the economic crisis. Other analysts, much(prenominal) as John Williamson of the Peterson governance of outside(a) Economics, have been less sanguine some the prospects of Brazils economy. Wiliamson statedMoreover, the markets pertinacious that while many of the emerging economies powerfulness no longer have any need for an inflow of loans, many (like Brazil) are still significant net debtors to the rest of the world and therefore still penetrable to a sudden withdrawal of fo reign credit. Compounding this is the fact that one may have a balanced general position and still be unsafe because debts are concentrated at short maturities. Hence one read, for example, of the Bovespa index move by over 10 percent in a day (it has cumulatively halved in value since the peak in May).Likewise, the real has fallen by a cumulative 32 percent in the past month. The markets clearly do not believe that Brazil has been made bombproof (Williamson, 2008) The world market contraction has had a significant effect on Brazils foreign grapple. (Williamson, 2008) The export economy has relied upon raw materials for 50% of exports, and the termss of these materials have dropped dramatically in the face of world-wide declines in demand. (Williamson, 2008) The other half of Brazils exports, secern make goods have also change magnitude in the face of reduced demand.Ironically, the helplessness of the real against foreign currencies has softened the contradict effect of t hese factors. (Williamson, 2008) The soft real entrust inspire join ond purchase of manufactured goods from Brazil. This will soften, tho not eliminate, the forbid effects of low demand. The decrease in foreign capital that these commodity price decreases have studyed, will rapidly eat through Brazils trade surplus, and put strain on change institutions in Brazil. (Williamson, 2008) The future of Brazils economy has been reported with varying degrees of optimism.The gross domestic product of Brazil is projected to contract anyplace from 1. 5 to 20% in 2009 afterward growing 5% in 2008. (Williamson, 2008) An increase in the shift of agricultural exports to china has also contributed to the overall positive projections of the Brazilian economy. (Xinhua, 2009) The increase from action of 2008 (8. 5%) to demo of 2009 (12. 5%) amounts of agricultural exports to China reflect this phenomenon. (Xinhua, 2009) The president of Brazil claims that the crisis has passed, and that Braz il has hold the worst part of the economic crisis of 2008.(Xinhua, 2009) The senior status of the world-wide recession will determine if this is in fact a true prediction. (Xinhua, 2009) Brazil weathered the economic crisis of 2008 comparatively strong, but suffered great financial repercussions late in the year. The economy seems to be in a stage of recovery, but its continued well being will rely on the recovery of other nations that control lending power and demand for Brazils exports. Work Cited Cardenas, M. (2008) ball-shaped Financial Crisis Is Brazil a Bystander? Retrieved June 4th, 2009 from Brookings Institution websitehttp//www. brookings. edu/opinions/2008/1015_financial_crisis_cardenas. aspx Williamson, J. (2008) The Impact of the Global Financial Crisis on Brazil Retrieved June 4th, 2009 from Peterson Institution of international Economics website http//www. iie. com/publications/papers/williamson1008. pdf Xinhua (2009) Brazils agricultural exports to China up 52. 5 percent in March Retrieved June 4th 2009 from Chinas states Daily website http//english. people. com. cn/90001/90778/90857/90861/6634356. html