The Political Economy of Brazilian Capital Flows after the Real Plan
Abstract
The present study investigates some issues related to the behavior of the capital flow in the Brazilian economy from the point of view of political economics after the adoption of the Real. It also identifies the main international players and their attitudes in response to the evaluation of the risk associated with capital flows. These players can be grouped in six categories: Club of Paris, Club of London, G7, multilateral organizations, institutional investors and rating agencies. The good performance of the financial account of the balance of payments is due to the inflow of direct foreign investment in the privatization of Brazilian companies. The private sector and investors adopted a conservative behavior, using some instruments for risk protection. Theses attitudes were crucial to reduce the intensity of the Brazilian crises after the introduction of the new currency. The Brazilian macroeconomic framework became much more robust due to the credibility of the control of inflation and public expenditures by the Brazilian government and due to the continuous increase of external surpluses.
Key words: Brazilian economy, political economy, capital flows, exchange policy, group ofinterest.
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