A Strategy of Development with Stability
To resume economic growth after 20 years of quasi-stagnation depends on a growth strategy that combines macroeconomic stability with growth-oriented policies. The Real Plan stabilized prices, but, as a trade-off, the interest rate skyrocketed while the exchange rate remains artificially appreciated. The main challenge is to reduce the basic interest rate, which is considerably higher than the ones in countries with similar country risk classification. There are several reasons for that including little concern of the monetary authorities with reducing the interest rate, and the inverse relation between the interest rate and the default risk: the high interest rate defined by the Central Bank influences upward the Brazil risk.
JEL Classification: E4; E5; O54.
Keywords: Interest rate exchange rate Brazil risk Central Bank