Brazil Currency Devaluation

Introduction - History

The Spanish navigator Vicente Yбсez Pinzуn 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 Ð'lvares 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, Thomй 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. Sгo 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 Parб, Mato Grosso and Rondфnia states. The majority of the wood stays in Brazil (86 percent), and 20 percent of that supplies the markets in Sгo Paulo state (Brazil's Forests in Brief). Among Brazil's other gifts of nature are find mineral resources such as quartz, diamonds, chromium, iron ore, phosphates, petroleum, mica, graphite, titanium, copper, gold, oil, bauxite, zinc, tin, and mercury, manganese, nickel, platinum, uranium, hydropower

Politics (past/present)

In 1961 Janio da Silva Quadros became President. He believed that Brazil had to trade with all nations and worked to increase trade with communist countries such as Cuba. Pres. Joao Goulart succeeded him after seven months, when military leaders feared that Silva would open the doors for a communist take over. In 1964 troops forced Goulart out of office and Gen. Castel Branco took over. Branco was given many powers by the military including the right to suspend the rights of citizens and he was succeeded by three other Generals until 1978. During the late 1960's and early 1970s Brazil's economy flourished after the military banned political as well as trade union activities (Brazil Government).

In 1985 military rule ended and Brazil returned to democratic civilian government after more than two decades of military rule. The October 5, 1988 constitution reenacted/revised, establishes presidential system made up of executive, legislative, and judicial branches. The president holds office for 4 years, with the right to re-election for an additional 4-year term, and appoints his own cabinet. There are 81 senators, three for each state and the Federal District, and 513 deputies. Senate terms are for eight years, with election staggered so that two-thirds of the upper house is up for election at one time and one-third four years later. Chamber terms are for four years, with elections based on a complex system of proportional representation by states. The seats are allotted proportionally to each state's population, but each state is eligible for a minimum of eight seats and a maximum of 70 seats. The result is a system weighted in favor of smaller states (Brazil Government). The first directly elected president in twenty-nine years was President Fernando Collor de Mello elected in November 1989 and took office on March 15, 1990. President Collor was impeached in September 1992 on corruption charges, and he was removed from office. His vice president, Itamar Franco, then assumed presidency. In October 1994, Brazil held elections for presidency, state governorships, Chamber of Deputies, and two-thirds of Senate. Fernando Henrique Cardoso held reign for two consecutive terms 1994-2002 while current President Luiz Inacio Lula da Silva's period in office is scheduled to end in 2006.

There are fifteen political parties that are represented in Congress. Since it is common for politicians to switch parties, the proportion of congressional seats held by particular parties' changes regularly. The following are the major political parties:

o PFL - Party of the Liberal Front

o PMDB - Party of the Brazilian Democratic Movement

o PSDB - Party of the Brazilian Social Democracy

o PP - Progressist Party

o PT - Workers' Party

o PDT - Democratic Labour Party

o PTB - Brazilian Labor Party

o PSB - Brazilian Socialist Party

o PSTU - United Socialist Workers' Party

o PCdoB - Communist Party of Brazil

o PL - Liberal Party

Brazil Economic Status

Fiscal issues were at the heart of