Brazilian economy strong, Argentinian crisis aside

Brazilian economy strong, Argentinian crisis aside

By Ana Lucia Richa

By Ana Lucia Richa

Rockford College Internexus Student

& Brazilian Journalist

The international market must know that the Brazilian capital is Brasilia and not Argentina’s Buenos Aires—that stands as the challenge for Brazilian capitalism and economic diplomacy during the Argentinian crisis.

An inattentive point of view about the economic situation in South America can cause people to make a mistake and think that the Argentinian economic problems are happening in the neighboring Brazilian economy as well. Remember, the southern section of our continent known as South America is comprised of many countries.

Specifically for the Brazilian economy, the common lack of delineation from the significant Argentinian economy can fall as an important misconception. This mistake could keep away the international investors, bringing damage to the Brazilian economy.

The Brazilian economy enjoys growth, while the Argentinian economy suffers hardship. In the last year, Brazil’s industrial activity developed by 6.5 percent, according to the Brazilian Institute of Geography and Statistics (BIGS). Unlike Argentina, Brazil’s objectives proposed by the International Monetary Fund (IMF) are being carried out year by year, and inflation has been controlled in low levels for eight years. The cumulative rate of inflation in 2001 was 7.70 percent, and the March 2002 rate was 0.60 percent, according to BIGS.

This doesn’t mean that Brazil is safe from shocks from the global economy. Even though Brazil’s economy outperforms other Latin American countries’ output, Brazil’s efforts are vulnerable.

The Brazilian economist Bruno Sacramento believes that the main difference between Brazil and Argentina is that the economic policies of Brazil have made the country more powerful against crisis in the last four years. While the Argentinian government was spending much of its national resources trying to equate the dollar with the peso (1:1), The Brazilian government was worried about maintaining a low inflation rate and making economic adjustments, tracking the international context.

The Brazilian economy could suffer in two specific levels because of the Argentinian economic collapse.

First, Brazil and Argentina are commercial partners. The two countries have agreements that exempt both from some import and export taxes. But the contracts leave both free to establish other commercial relations. Besides, Argentina is not Brazil’s biggest consumer market—America and Europe are the largest export destinations.

According to Robert Rubin, the former U.S. Treasury secretary, the deceleration of the U.S. economy is more dangerous to the Brazilian economy than is the reduction of exports to Argentina. Rubin declared in an interview with a Brazilian magazine Dinheiro (Money) that he believes that the Brazilian economy is less vulnerable today because its tax reforms have been beneficial.

The second level of the Argentinian crisis that can bring Brazil problems concerns the image of an economy in development. The international economic community has a tendency to look at all the countries with economies in development as if they were the same. This mistaken and undiscerning image melds Brazil and Argentina because they are neighbors.

This mistaken point of view could lead global markets to think that Brazil lacks reliablity for investment. This weak conceptual pairing may be the worst consequence of the Argentinian collapse for Brazil. Brazil must stress its strength to the international economic community—so the understanding grows that Brazil’s economy is really different and independent from Argentina’s—just as each country’s capitals are different and independent of each other.

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