During the first half of the decade

During the first half of the decade, it was forced to interfere swiftly in an attempt to control the external crisis and to avoid the collapse of the coffee economy; government leaders hoped that the crisis would pass soon and that another export boom would occur. However, with the magnitude and duration of the crisis it became clear that Brazil could no longer rely solely on exports of primary goods and that it was necessary to promote economic diversification. Toshiba Satellite X205-S9349 CPU Fan During the Estado Novo, the government made initial attempts at economic planning, and in the late 1930s began to establish the first large government enterprise, an integrated steel mill,Companhia Siderúrgica Nacional. The World War II period saw mixed achievements. By the late 1930s, coffee production capacity had been reduced drastically, the worst of the external crisis had passed, and the Brazilian economy was ready to grow. HP Pavilion dv7-3020es CPU Fan However, the war interfered with development efforts. Output increased mainly through better utilization of the existing capacity but, except for the steel mill, there was little industrial and infrastructure investment. Thus, at the end of the war Brazil's industrial capacity was obsolete and the transportation infrastructure was inadequate and badly deteriorated. HP G62-369TX CPU Fan A review of the evolution and structural changes of the industrial sector since the end of World War II reveals four broad periods. The postwar period to 1962 was a phase of intense import substitution, especially of consumer goods, with basic industries growing at significant but lower rates. The 1968 to 1973 period was one of very rapid industrial expansion and modernization (between 1962 and 1967, the industrial sector stagnated as a result of adverse macroeconomic conditions). HP 13.V1.BJ195.F.GN CPU Fan The 1974 to 1985 phase was highlighted by import substitution of basic inputs and capital goods and by the expansion of manufactured goods exports. The period since 1987 has been a time of considerable difficulties. At the end of World War II, political and economic liberalism were reintroduced in Brazil. Getúlio Dorneles Vargas (president, 1930–45, 1951–54) was overthrown, democratic rule was reestablished, and the foreign-exchange reserves accumulated during the war made possible a reduction of trade restrictions. Toshiba Satellite L675D-S7016 CPU Fan However, trade liberalization was short-lived. The overvalued foreign-exchange rate, established in 1945, remained fixed until 1953. This, combined with persistent inflation and a repressed demand, meant sharp increases in imports and a sluggish performance of exports, which soon led again to a balance of payments crisis. Pessimistic about the future of Brazil's exports, the government feared that the crisis would have a negative impact on inflation. HP Pavilion dv7-1451nr CPU Fan Consequently, instead of devaluing the cruzeiro, it decided to deal with the crisis through exchange controls. In 1951 the newly elected government of Getúlio Vargas enforced a recently established system of import licensing, giving priority to imports of essential goods and inputs (fuels and machinery) and discouraging imports of consumer goods. HP G62-a57SG CPU Fan These policies had the unanticipated effect of providing protection to the consumer goods industry. Early in the 1950s, however, convinced that the only hope for rapid growth was to change the structure of the Brazilian economy, the government adopted an explicit policy of import substitution industrialization. An important instrument of this policy was the use of Foreign exchange controls to protect selected segments of domestic industry and to facilitate the importation of equipment and inputs for them. SONY Vaio VGN-NR31S/S CPU Fan However, the move to fixed exchange rates together with import licensing drastically curtailed exports, and the balance of payments problem became acute. The system became nearly unmanageable, and in 1953 a more flexible, multiple-exchange-rate system was introduced. Under the latter, imports considered essential were brought in at a favored rate; IBM 91P9252 CPU Fan imports of goods that could be supplied domestically faced high rates and were allotted small portions of the available foreign exchange. Similarly, some exports were stimulated with a higher exchange rate than those of traditional exports. This system continued to be the main instrument for the promotion of import substitution industrialization, but the performance of the export sector improved only modestly. Toshiba Satellite M70-122 CPU Fan Between 1957 and 1961, the government made several changes in the exchange-control system, most of which were attempts at reducing its awkwardness or at improving its performance with the advance of import substitution industrialization. For this same purpose, the government also introduced several complementary measures, including enacting the Tariff Law of 1957, SONY UDQFWPH22FQU CPU Fan increasing and solidifying the protection extended to domestic industries, and offering strong inducements to direct foreign investment. In the second half of the 1950s, the government enacted a series of special programs intended to better orient the industrialization process, to remove bottlenecks, and to promote vertical integration in certain industries. HP Pavilion dv6-2150ei CPU Fan The government gave special attention to industries considered basic for growth, notably the automotive, cement, steel, aluminum, cellulose, heavy machinery, and chemical industries. As a result of import substitution industrialization, the Brazilian economy experienced rapid growth and considerable diversification. Between 1950 and 1961, the average annual rate of growth of the gross domestic product exceeded 7%. Industry was the engine of growth. HP G42-367TU CPU Fan It had an average annual growth rate of over 9 percent between 1950 and 1961, compared with 4.5% for agriculture. In addition, the structure of the manufacturing sector experienced considerable change. Traditional industries, such as textiles, food products, and clothing, declined, while the transport equipment, machinery, electric equipment and appliances, and chemical industries expanded. Toshiba Satellite P100-238 CPU Fan However, the strategy also left a legacy of problems and distortions. The growth it promoted resulted in a substantial increase in imports, notably of inputs and machinery, and the foreign-exchange policies of the period meant inadequate export growth. Moreover, a large influx of foreign capital in the 1950s resulted in a large foreign debt. ACER Aspire 5739 CPU Fan Import substitution industrialization can be assessed according to the contribution to value added by four main industrial subsectors: nondurable consumer goods, durable consumer goods, intermediate goods, and capital goods. Using data from the industrial censuses, the share of these groups in value added between 1949 and 1960 shows a considerable decline in the share of the nondurable goods industries, IBM ThinkPad T40 2678 CPU Fan from nearly 60 percent to less than 43 percent, and a sharp increase in that of durable goods, from nearly 6 percent to more than 18 percent. The intermediate and capital goods groups experienced moderate increases, from 32 to 36% and from 2.2 to 3.2%, respectively. IBM Thinkpad T43 CPU Fan A representative component of the nondurable group is the textile industry, the leading sector before World War II. Between 1949 and 1960, its share in the value added by industry as a whole experienced a sharp decline, from 20.1% to 11.6%. In the durable goods group, the component with the most significant change was the transport equipment sector (automobiles and trucks), which increased from 2.3% to 10.5%.IBM ThinkPad T43 2668 CPU Fan The lower increases in the shares of the intermediate and capital goods industries reflect the lesser priority attributed to them by the import substitution industrialization strategy. In the early 1960s, Brazil already had a fairly diversified industrial structure, but one in which vertical integration was only beginning. Thus, instead of alleviating the balance of payments problems, import substitution increased them dramatically. IBM ThinkPad T43 1871 CPU Fan As a result of the problems associated with import substitution industrialization and the reforms introduced by the military regime after March 1964, the Brazilian economy lost much of its dynamism between 1962 and 1967. The average rate of growth of GDP in the period declined to 4.0 percent and that of industry to 3.9 percent. In part, stagnation resulted from distortions caused by the strategy. ACER Travelmate 8104WLMI CPU Fan Moreover, political troubles negatively affected expectations fac and precluded the formation of a coalition to back the introduction of tough measures to control inflation and the balance of payments crisis. Political troubles also hindered the removal of obstacles to growth. The 1964 coup dealt with the political obstacles by forcefully restraining opposition to the military agenda of change. DELL Latitude E4300 CPU Fan With the objective of transforming Brazil into a modern capitalist economy and a military power, the regime implemented a series of reforms aimed at reducing inflation, at removing some of the distortions of import substitution industrialization, and at modernizing capital markets. The regime gradually introduced incentives to direct investment, domestic and foreign, ASUS F80S CPU Fan and tackled balance of payments problems by reforming and simplifying the foreign-exchange system. In addition, the regime introduced a mechanism of periodic devaluations of the cruzeiro, taking into account inflation. Finally, the military government adopted measures to attract foreign capital and to promote exports. It took steps to expand public investment to improve the country's infrastructure and later to develop state-owned basic industries. HP Pavilion dv5-1058eo CPU Fan