GLOBALIZATION
Impact of the Economic Crisis 2008 on Brazil and Kerala and a Sustainable Solution for it
Introduction “Worst Crisis Since '30s, With No End Yet in Sight” (Jon Hilsenrath, 2008). 2008 was a year which collapsed many of the world’s greatest economy. It was the year where not only a region, a country a continent but the entire globe was in the same boat, and that was The Economic Crisis. The Economic Crisis not only led to recession, but also led to a highly increased unemployment rate around the world. The financial crisis was referred to being, ‘The crisis of wealth destruction’. By March 2009, US $34.4 trillion of global wealth had been destroyed. Some countries stood strong during this crisis, but some had to go through
…show more content…
Kerala (A state in Southern India) and Brazil are two good examples of this. These both state/country faced the crisis in their own ways, where Kerala developed the concept of Micro-Financing Banks alongside promoted Women Empowerment, Brazil’s Economy had started to demolish in 2009. But the question here is, what both the places did differently that can be further on used in the future, to prevent another financial crisis. What measures did Brazil take in terms of their banking to survive this global crisis? Is there a sustainable solution to this problem, if yes what? Before going into detail about these questions it is important to know what the Economic Crisis is and why it happened.
The Economic Crisis- The Bigger Picture The Economic Crisis is considered to be the worst crisis in history after the Great Depression (1930). The Financial Crisis resulted in the bailout of
…show more content…
It is hosting the FIFA World Cup this year (20140 as well as the Summer Olympics in 2016. This requires massive investments in urban and social development sectors as well as development in the transport infrastructure. Though the Brazilian Economy has slowed down since 2011 due to domestic and external factors, the financial and banking system have remained strong and resilience during this slowdown. Government has been active in the past few years, introducing number of initiatives to reduce energy costs, restructure oil royalty payments, strengthen investment in infrastructure through foreign participation etc. Poverty has also decreased from 21% in 2003 to 11% in 2009. A significant decrease in income inequality has also been observed. Environment is one sector, where some great concern has been shown by the Brazilian Government. There has been phenomenal progress in decreasing deforestation in Brazil, but a sustainable solution is still required to ensure environmental protection. (Worldbank.org- Brazil
For the government to overcome deficiencies efficiently in the sectors of industry, the private sector must have an active involvement in capital investment and creation of services. Brazil’s potential in a global market is set back by inefficiencies in infrastructure that turn away private investment.
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
The purpose of this paper is to demonstrate how Brazil, a country with an extremely high rate of inflation and low growth, positioned itself as the 7th largest economy of the world and what are the challenges that the country is facing. First of all, the Real Plan of Fernando Henrique Cardoso and how it helped the country to stabilize its economy and drop down the inflation rate will be discussed. Secondly, how his successor’s policies, Luis Inácio Lula da Silva, improved country’s economy. At the end the challenges that Dilma Vana Rousseff, the current president, is facing will be discussed.
Brazil is the largest economy in South America. Under the leadership of former president Henrique Cardoso in the 1990's, the country's macro economic situation stabilized significantly. As the new millennium began, the leadership of president Cardoso's successor, former president Lula da Silva saw the country's economy accelerate significantly such that the Lehman scandal effect failed to significantly affect its growth (The Economist). Brazil economy reported an economic growth rate of more than seven percent in 2010 which is considered as its best performance in 25 years. This trend saw the country awarded the lucrative rights to host this year's FIFA World Cup Finals. However, this has changes dramatically after former president Lula da Siva convinced Brazilian voters to elect Dilma Rousseff as their next president (The Economist). Currently, the country' macro economic status is in turmoil with economic growth in 2012 reported to have been at less than 1%. This essay seeks to analyze the contemporary macro economic conditions in Brazil and present a commentary on the...
Brazil is an enormous and diverse country with a long and turbulent history, and an economy that reflects this. With the seventh largest GDP in the world and a population of over 200 million, no discussion of Brazil is without political or economic significance, both for its people and for the world as a whole. As such, inequalities in income (also reflected in geography, race and gender) certainly matter, and must be a key concern for those who promote the development of the country; these gaps mean that poor members of society gain nominally less from growth, although figures show relative gains , an outcome which is undesirable for various economic, social and ethical reasons. Brazil’s development gaps, including its flagrantly high income inequality, but also its deficient infrastructure, political and social problems, have deep but traceable origins in political institutions.
Brazil is far from being a paradise on Earth. There is still a lot to be done. But from the eyes of an expat, I can see clearer the results of continuous transformations in Brazil than my fellow compatriots who are living and experiencing every small change over time. I have seen more changes in education and health happening lately than during my entire lifetime. I grew up hearing from several sources that Brazil would some day be the "country of the future." I thought that I would not live to see this day. Today, I can say that we are closer to the promised "future" than we ever were. Brazil is not the same as it was ten years ago. This country can finally be proud to honor the words written on its flag - "Order and Progress."
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
A report compiled by the U.S Financial Crises Inquiry Commission shows that the infamous global crises could have been avoided. It pointed out that failure in different financial institutions including the Federal Reserve accelerated the crises. Lehman brothers; one of the three largest investments banks in the United States has been cited in the financial crises in 2007. The bank went bankrupt and it had to be sold in September 2008 (Currie, 2010). The other two banks Morgan Stanley and Goldman Sachs had to become commercial banks where more regulation was done. The collapse of large and significant financial institutions like the Lehman Brothers propagated the economic crises. Investors withdrew over $150 billion from the money funds in the USA in two days after the collapse of the Lehman Brothers. This caused the money markets to get unstable thereby nee...
Globalisation has been crucial to the economic and social development of Brazil. In the late twentieth century Brazil face years of economic, political and social instability experiencing high inflation, high income inequality and rapidly growing poverty. However after a change of government in the 1990s and large structural changes in both the economic and social landscapes, the brazilian economy has been experiencing a growing middle class and reduced income gap. Since the start of the 21st century, brazil has benefitted from the move to a more global economy.
Brazil's economy has a lot of potential. Throughout Brazilian economic history, the government has had an economic policy based on import substitution and it was also trying to switch from agriculture to industry. To insentivate domestic industry, the government established protective tariffs and import quotas. Most of the enterprises were owned by State such as: steel, oil, infrastructure, and others. These firms also received subsidize "long-term credit expand." For these reasons it had been difficult to establish ventures in Brazil.
In 1822, Brazil became a nation independent from Portugal. By far the largest and most populous country in South America, Brazil has overcome more than half a century of military government to pursue industrial and agricultural growth and development. With an abundance of natural resources and a large labor pool, Brazil became Latin America's leading economic power by the 1970’s.
Brazil is both the largest and most populous country in South America. It is the 5th largest country worldwide in terms of both area (more than 8.5 Mio. km2 ) and habitants (appr. 190 million). The largest city is Sao Paulo which is simultaneously the country's capital; official language is Portuguese. According to the WorldBank classification for countries, Brazil - with a GDP of 1,5 bn. US $ in 2005 and a per capita GPD of appr. 8.500 US - can be considered as an upper middle income country and therefore classified as an industrializing country, aligned with the classification as one of the big emerging markets (BEM) next to Argentina and Mexico. Per capita income is constantly increasing as well as literacy rate (current illiteracy rate 8%). Due to its high population rate (large labour pool), its vast natural resources and its geographical position in the centre of South America, it bears enormous growth potential in the near future. Aligned with an increasing currency stability, international companies have heavily invested in Brazil during the past decade. According to CIA World Factbook, Brazil has the 11th largest PPP in 2004 worldwide and today has a well established middle income economy with wide variations in levels of development. Thus, today Brazil is South America's leading economic power and a regional leader.
In the current economic times the development and growth of any economy has come to a near stop or at least to a drastic slow down. The face of the global economic environment has changed and many new countries are starting to change the way their country and the rest of the world does business. One such nation is Brazil, who has turned around their own economic troubles and is becoming one of the fastest growing economies in the world (World Factbook). Brazil has started developing its economy and using the opportunity to achieve a level of respect in the world.
The recent Global Financial Crisis (GFC) initially began with the collapse of credits and financial markets, which caused by the sub-prime mortgage crisis in the US in 2007. The sub-prime mortgages were given to high-risk lenders (with bad credit history) who were in danger of defaulting, which eventually caused a global credit crunch, where the banks were unwilling to lend to each other. In October 2008, the collapse of the major financial institutions and the crash of stock markets marked the peak of this global economic slowdown (Euromonitor International, 2008).
Steverman,B. and Bogoslaw, D. (2008) ‘The financial crisis blame game’, Business week, October [Online]. Available at: http://www.businessweek.com/investor/content/oct2008/pi20081017_950382.htm?chan=top+news_top+news+index+-+temp_top+story (Accessed: 1st August 2010).