UIUC Econ 452: Week 6
UIUC Econ 452: Week 6 Econ 452
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This 2 page Class Notes was uploaded by Laura Kunigonis on Friday March 4, 2016. The Class Notes belongs to Econ 452 at University of Illinois at Urbana-Champaign taught by Werner Baer in Spring 2016. Since its upload, it has received 12 views. For similar materials see Economies of Latin America in Economcs at University of Illinois at Urbana-Champaign.
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Date Created: 03/04/16
Econ 452 week 6 8. Depression of the 1930s - Exports decline from $445.9 million in 1929 to $180.6 million im 1932 - Imports of manufactured declined, and their relative internal price rose 9. this lead to spurt of import substitution sure of capacity built up in the 1920s 10. Funds for industrial growth – from importers, coffee sector and coffee support program - Brazilian states bought up extra coffee to prevent a substantial decline in price - Later federalized to support coffee sector and keep recession at bay 11. additional government interventions: Control various sectors 12. Getulio Vargas dominated scene Throughout the 1930s up to 1945: “estado novo Introduced various social programs: Promoted steel industry – esp. Volta Redonda project – integrated steel mills (CSN) state owned 13. impact of World War II – more intensive use of existing capacity 14. As result of war, Brasil emerges with large foreign exchange reserves of $708 milllion in 1945 15. new government opens economy and a flood of import exhaust reserves- Results in reimposition of import controls, which acts as new stimulus to industry 16. ISI in the 1950s: Deliberate use of industry promotion as strategy of economic development Jusulino Kubritschek (new president) 17. Instruments used: - Tariffs and exchange controls - Attraction of foreign investment - State enterprises in basic industries of public utilities Cosipa and usiminas, integrated steel mills - Development bank (BNDE – later becomes BNDES) - Special “executive groups” to rapidly promote specific industries - Rapid growth of domestic supplier firms - Industry promoted “across the board” protection for everyone (import substitution) 18. results: high real growthrate of GDP for over a decade (6% a year), lead by industry which was growing at 11% a year. Also, change in the structure of the economy – decline of agriculture in GDP and growth of industrial GDP 19. Post ISI problems a) Import coefficient problem (bring down the import coefficient) - import coefficient = imports/Gdp - import coefficient decreased at first but then began to rise again - Brazil cannot be self-sufficient (manufactured goods require imported inputs)
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