ABSTRACT
Brazil's development strategy emphasized maximum public and private investment, with little thought for the economic and financial costs. The strategy, though far from failproof, appeared to work until Brazil was severely impacted by a series of external shocks during the 1979-1982 periods. The Mexican and Argentine debt crises of mid-1982 had a strong and immediate impact on Brazil. It had become increasingly difficult to finance the deficit in the account of the balance of payments. In January 1983 the Brazilian government reached an agreement with the International Monetary Fund on a three-year economic program. It quickly became evident that the program was unrealistic. The government suddenly devalued the cruzeiro in February 1983 by 30 percent. That measure immediately increased Brazil's export competitiveness. While foreign trade was increasing dramatically, the internal adjustment requirements took far longer to implement politically and have been disappointing in terms of performance.
