Volume 43, Number 168,
January-March 2012
Crisis and Economy Recovery: The Role of Fiscal Policy
Moritz Cruz and Javier Lapa
CRISIS, ECONOMIC RECOVERY AND FICAL POLICY:
EMPIRICAL EVIDENCE FOR ARGENTINA, BRAZIL, KOREA, MEXICO AND RUSSIA ( ...continuation )

As we have seen, in fiscal terms Brazil shows important similarities to Mexico although only in its response to the crisis. We recall that in the face of financial crisis the Brazilian government decided to implement a fiscal package based on the recommendations of the International Monetary Fund (imf), and so in 1999 increased public revenues while reducing expenditure, compared with the previous year. This resulted in a significant tax surplus of almost 2% of gdp (see Table 3). This momentum intensified the following year when public surplus grew to 3.2% of gdp. So in the case of Brazil, it is possible to argue that fiscal policy remained restricted in response to the crisis ex-post in such a way that it did not contribute to economic recovery. This led to an increase in exports as a result of the significant devaluation of the currency during the crisis, as with the Mexican economy. In effect, the Brazilian currency, the real, devaluated 64% between 1998 and 1999 from $1.1 reales per dollar in 1998 to $1.8 reales per dollar in 1999.With this devaluation, exports grew 5.7% in 1999 and 12.9% in 2000.

Nonetheless, the performance of the fiscal balance from the year 2000, when sometimes significant deficits are recorded, such as the 2005 gdp rate of 3.5%, suggests that the Brazilian government understood the need to promote growth by stimulating demand, promoting supply at the same time through public spending. In this respect, public spending as a percentage of gdp from 2001 exceeds the pre-crisis level, and rises to 26% of gdp from 2005. The gradual increase in public spending and its impact on effective demand and supply established the basis for rapid and sustained long term growth.

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Published in Mexico, 2012-2018 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: August 29th, 2018.
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