Understanding the Multinational Footprint in Brazil

  In December 1998, Congress totally ghosted the government's proposal for social security reform, which would've hiked up taxes on those high-paid civil service pensioners. So not lit, fam. This was such a major L, fam viewed hella bad by investors and capital outflows went turbo at the end of the year. So like by mid-January 1999, the financial authorities were like "we give up" and the government was all like "fine, let the exchange rate do its thing." The real fell 40 percent over the next two months, fam. But like, the central bank and investor confidence were totally restored when Arminio Fraga was appointed as the central bank governor. It was legit awesome! Fraga, a total boss investment banker, was able to start flexin' and bringin' down them interest rates from a crazy high of 45 percent in tiny increments, which totally boosted everyone's trust in how the economy was bein' handled (Roett, 2010:101).

Keeping inflation on fleek is like, hella important for the central bank rn.

 

The central bank like totally went with an inflation targeting strategy where being all about stability became the main goal of monetary policy (Roett, 2010:102). The gov also did what it takes to flex that primary budget surplus the IMF be asking for. They totally agreed to achieve a surplus of 3.1 percent of GDP, like, for real. Taxes got hiked for the rich peeps. OMG, like, from '94 to '97, the GDP growth was, like, around 4 percent. The economy was, like, thriving, thanks to the Real Plan. OMG, like in the super wild years 1998 and 1999, growth was literally 0,0 percent and 0,3 percent, respectively (World Bank). The budget situation was hella tight and interest rates were sky-high, which like totally caused a limited economic growth during these years (Roett, 2010:102). Cardoso's second terms as prez ended in 2002, when Lula was elected. The consensus, like, this whole plan from the 80s, was all about making the economy cool and stuff. It was like, let's fix the money problems and inflation, open up to trade with other countries, get rid of rules, make our own money markets, and sell off government-owned companies (Roett, 2010:103). This was, like, a total market-oriented neoliberal reform that Lula, like, explicitly campaigned against. No cap. It didn't work well under Cardoso's regime, so Lula wanted to choose a different vibe (Roett, 2010:104).

OMG, like, looking back at his time in office, it's, like, obvi that this decade has been a total mood. 

The authorities had to flex with a super high real interest rate and put a cap on public spending to keep those international stacks flowing and secure the currency's stability. OMG, the high interest rates totally caused low inflation, but they also made the cost of public sector debt go up and like, killed business investment. New taxes were like, totally introduced; they like, increased the burden of an already inefficient tax system to, like, generate new government revenues. Obvi these new taxes boosted gov revenues, but like, they totally killed the vibe for formal sector jobs and messed with domestic biz investment. These years with Cardoso in office were like, hella focused on fighting inflation, like it was the top priority and nothing else even mattered. This caused mad unemployment, a major drop in consumption, and the currency got hella devalued (Roett, 2010:107). A new round of reforms was like, totally needed to flex Brazil into a BRIC country, you know? Brazil was like, hella in need for a major glow up in the beginning of the last decade. The election of Luis Inacio "Lula" da Silva was hella lit, fam. There was like, a major need for economic change, but also a big desire for social and political transformation after, like, more than a decade of neo-liberal experiments (Bianchi and Braga, 2005). Yo, the presidential campaign that started in 2001 was like, mad crazy 'cause it had these two totally different candidates, you feel me? Jose Serra was, like, a total boss as the ex-minister of health and a tight homie of President Cardoso. And Lula was still holding it down as the leader of the PT coalition, you know? Sierras link to Cardoso and the unpopular "Washington consensus", kinda held him back in his campaign. 

Lula is, like, this Northeastern migrant who like, totally escaped the hunger that like, took over his hometown of Garanhuns, with his mom and like, seven siblings.

 He's a total unionist who, like, totally made his mark in the late 70s and will be remembered in Brazil's history forever, ya know? For many, voting for him was like flexing their social identity and getting woke politically (Bianchi and Braga, 2005).

In early 2003 when Lula took office, Brazil's economic situation was hella delicate. Growth was like, hella low, foreign reserves had fallen below $40 billion and its external debt was now more than 45 percent of the country’s GDP. It's a total yikes, fam. Lula's squad wanted to flex on the government's dedication to keeping it fiscally responsible and securing that budget surplus, ya know? (Roett, 2010:110). There was, like, a major glow-up in the workers party, and other political parties were like, "Let's flex and go to the center." The conservative parties in Congress teamed up with Lula to back a pretty wack economic agenda. The gov be flexin' their tight control on spendin', and revenues be poppin' off 'cause they be crackin' down and collectin' more. The government's biggest flex was to stay on that grind and chase those lit fiscal targets set by the IMF. The primary surplus goal (i.e. the balance of cash and non-debt related spending) got bumped up from 3.75 percent to 4.25 percent of GDP. The primary surplus was like 5.16 percent in September 2005 (Amman, 2005). Tax income was like, totally lit in 2003-2004, reaching 36 percent of GDP by