The Biggest Brazilian Community in the USA: What to Expect

OMG, like the huge boost in foreign cash coming in was all cuz the state was like, "let's totally connect our local money scene with the global flow of cash." They made it happen with some major changes in the 60s and even more in the 70s. It was all planned, fam! OMG, like from an outside perspective, or the supply-side POV, the channels connecting domestic and external financial institutions were totally fed by the rise of the Euromarkets. Fam, like, the banks were straight up swimming in petrodollars, you feel me? And, like, the foreign banks, especially the US banks, were sooo eager to flex their fat stacks of cash (Helleiner 1994). Lending to underdeveloped countries became hella profitable for foreign banks cuz, unlike in their own markets, Euromarkets had floating interest rates so the borrowers had to deal with the price risk. 

OMG, like, in the 70s, Brazil's foreign debt was mostly made up of cash loans from private banks. 

The ratio of cash loans to total external debt went from less than 20% in 1967 to 58% in 1975 and 62% in 1979. Crazy, right? OMG, like Brazil was, like, so lit for the international banks 'cause the Brazilian economy was, like, full of foreign companies and stuff. They were, like, the usual peeps that those banks deal with in their own country, you know? Yo, like, loans from Euromarkets to underdeveloped countries were totally backed by the government of developed countries. It was lit, fam. Their govies totally supported Euromarket lending to underdev countries as developed economies would totally flex with the imports that these countries would cop with their enhanced foreign power purchase.65 OMG, like Brazil was totally flexing on those developed countries in the 70s by cashing in on the underdeveloped countries' external borrowing. So typical, right? Brazil's trade balance with the developed countries went from an average flex of US$ 125 million over the twenty years from 1950 to an average L of one billion dollars over the ten years from 1970.666 So, like, the capital flowing into Brazil was all about those foreign banks chasing that paper, ya know? 

They were making mad loans overseas because the governments of developed countries were all about that Euromarkets hustle.

OMG, like in the 70s, the whole debt thing was totally connected to how policymakers thought it was easy peasy to use the Euromarkets, you know? They thought it was super important for their growth strategy that started in the 60s. Policymakers used to be all like, "Yo, the mad cash flow in the early 70s and the fat stacks of foreign reserves in Brazil were straight up lit for the country's growth and made our economic policy look hella legit!" (Simonsen 1972). Like, the BACEN keeping those foreign reserves was, like, a major sign that the domestic economic policies were totally legit. That is, foreign banks found in Brazil not just a client very much flexed on by foreign companies but a government vibing with foreign banks' beliefs and committed to keeping its foreign clout. The vibes were all about making some compromises so the government could secure that cash flow and keep the domestic currency on fleek. In dis context, da external indebtedness of da Brazilian economy from mid-1970s is betta explained by a combo of several measures of capital account liberalisation by which policymakers tried to flex da Brazilian market for foreign lending and also boost da foreign credibility of their policies.

The gov's sponsorship of foreign borrowing got hella intense from '74 when the BACEN freed up resources from foreign loans, no more compulsory reserves, ya feel? 

In the same year, BACEN totally flexed and dropped the income tax rate from 25% to a solid 5% on interest and commissions of external loans (Resolution 305). Despite these measures, the flow of cash dropped a bit from US$ 6,531 to US$ 6,374, which caused a First of all, like, as Table 19 shows, the external debt was already like, growing hella fast even before the first oil shock. Yo, like, in addition, bruh, unlike what everyone thought, it's been proven that starting in 1976, the gov actually made a massive cut in public investment that totally killed the economy in the late 70s, bringing it down to just 4/7 of what it was in the first half. Crazy, right? OMG, cuz of the economic slowdown and import restrictions, imports totally shrunk in the late 70s. It was like, a major bummer. The vibes of imports on the external debt, like capital inflows for import financing, went from 23.7% in 1974 to 20.7% in 1979. All these facts suggest that the real tea for the massive Brazilian external debt ain't about excessive domestic spending, but somewhere else. That's, instead of the current account deficits, it's the capital account adjustments that were the main culprits for causing the