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War I (1914–18), when factories appeared for manufacturing. But it was only
from the 1930s onward that Brazil reached a level of modern economic
performance. In the 1940s, Brazil’s first steel plant was built in the state of Rio
de Janeiro, with U.S. financing.
From the 1950s through the 1970s Brazil’s industrial base expanded into
the automobile industry, petrochemicals, and steel. In the decades after World
War II, the annual growth rate of Brazil’s economy was among the highest in
the world. During the 1970s Brazilian, U.S., European, and Japanese banks
invested heavily in Brazil, further fueling the nation’s economy.
In the early 1980s, however, a rise in interest rates on loans affected
international investors. Brazil, like many other nations, cut back on
development because
capital
was not as readily available. The price of
goods rose steeply—hitting the poorest Brazilians particularly hard—but
government measures to control runaway inflation failed.
Finally, in the early 1990s, Brazil instituted a series of far-reaching
economic reforms. Some of these, for instance, put state monopolies in steel,
telecommunications, and electricity into private hands; promoted foreign
investment; and opened more opportunities for trade.
In 1994, after several unsuccessful attempts to bring down inflation, the
Brazilian government introduced the
Plano Real
(Real Plan), which kept a tight
rein on Brazil’s money supply and tied its currency to the approximate worth
of the U.S. dollar. The plan worked: prices stabilized, inflation dropped, and
foreign investment returned to Brazil. By the end of the decade, however,
Brazil was forced to stop pegging the real—which was deemed overvalued—
to the dollar. After the, the real plummeted.
The Economy: Powerhouse Potential
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