ABSTRACT
The economy of Brazil in the period from 1968 to 1973 is marked by an average annual growth-rate of GDP of 11.4% and a decline in the rate of inflation from 25.5% to 15.5% per year. A growing account deficit, largely caused by too ambitious a growth of domestic absorption, and the severe aggravation of the external imbalance caused by the oil shock, indicated the unsustainability of the very high rates of output growth observed in the 1967/1973 period. It seems that the development of an unbalanced growth-model, based on an extraordinary expansion of the domestic demand for consumer durable goods, also contributed to Brazil’s growing external imbalance. The 1974/1975 period was marked in Brazil by a deceleration of economic growth. As the rising price of imports – due to the direct and indirect effects of the oil shock – would inevitably have to work its way through the domestic production system, mounting inflationary pressure was widely expected in 1974.
