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Feb 8, 2018

Economic Crisis in Brazil: Its Roots, Causes and Scenarios

Studies by Sándor Gyula Nagy and Judit Ricz

Brazil’s economic growth has been steadily decelerating from 2011 onwards. After 2014, it has obviously turned into recession, with the largest South American economy showing clear signs of crisis. After identifying the main features of the economic crisis, we1 highlight the causal macro-economic factors, such as a diminishing trade balance, a rapid increase of household consumption, a low level of investment and the deterioration of fscal discipline, and attempt to uncover the underlying reasons for these processes. Then we focus on the micro-economic factors and analyze the low competitiveness of the Brazilian economy, as well as the structural changes deriving mainly (but not exclusively) from changes in the directions of trade policy (from the early 2000s onwards). The main conclusion of the paper is that the ongoing, complex Brazilian crisis cannot be explained only by changes in international economic trends (e.g. the falling prices of primary commodity goods); instead, Brazilian economic policy decisions have played a pivotal role as well.

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