INSUBCONTINENT EXCLUSIVE:
targeting, primary surplus, and floating exchange rates.This approach, initiated under President Fernando Henrique Cardoso and continued in
Prior to the crisis, Brazil had benefited from high commodity prices, accumulating $350 billion in foreign reserves and achieving a
comfortable external accounts position.This favorable scenario supported GDP growth and inflation control
(Photo Internet reproduction)However, this same low exchange rate later disadvantaged exporters
relationships with major trading partners further complicate matters
approach can disadvantage countries like Brazil that maintain a free-floating exchange rate policy
In response to such challenges, Brazil has attempted to mitigate effects on exports and imports through taxation measures.These include
raising the Financial Operations Tax (IOF) on foreign currency sales and increasing the IPI tax on imported products like vehicles
years, jumping from under R$5 to R$5.75 in early August 2024
Dual Trap Threatening Economic StabilitySome critics, including President Lula, have begun questioning the effectiveness of the current
economic policy framework
They argue for a departure from traditional economic theories, though without clearly articulating alternative approaches.The volatility in
exchange rates, combined with fiscal outcomes, remains a primary trigger for inflation when mismanaged
policy presents a dual trap: managing inflation while supporting exports and imports
Navigating this challenge requires careful consideration of economic theories and historical lessons, rather than ad-hoc policy decisions or
