The Latin America debt crisis occurred during the 1980s when many Latin American

economies reached a stage where their foreign debt exceeded their earning power, leaving
them unable to repay their debts. Due to the catastrophic effects of this crisis, it is also
referred to as the “lost decade”.
Brazil, Argentina and Mexico, and others, all borrowed heavily between the 1960s-1970s
when they began to implement their ‘import substitution industrialisation’ policies. Banks
saw these economies as safe bets at the time because they were all growing. Latin
American countries borrowed from the World Bank and, dangerously, from private
commercial banks who had just received an influx of money from oil rich economies.
Perhaps most dangerously, most of the debts undertaken were short-term and had to be
repaid in the near future.

Between 1975-1982, Latin America’s foreign debt quadrupled from $75 billion to $315
billion. This was half of the region’s GDP. Debt service (the interest repayments on loans)
rose extremely quickly from $12 billion in 1975 to $66 billion in 1982 due to the surge in
global interest rates.
At the same time, fatefully, Latin America suffered problems with their export revenues
because world trade was collapsing and because their exchange rate was deteriorating as a
result of their governments owing such large amounts of their national currencies to foreign
investors. Additionally, oil prices were rising, and Latin America were net importers of oil,
causing their imports to become more expensive.
The crisis then kicked in during August 1982 when Mexico announced that they would
default on their foreign debt. This created a domino effect as private banks stopped lending
to Latin America. Because no one wanted to lend to Latin America, and since most of the
debt was made up of short-term loans, billions of dollars worth of loans, which could
otherwise have been refinanced, were due immediately.
Latin American economies, unable to repay their debts, turned to the IMF. In return for
lending them money, the IMF forced Latin America to leave their import-substitution
industrialisation plans and, instead, push through free-market reforms and engage in a
serious bout of austerity to cut total government spending. This back-fired terribly as the
reduction in government spending halted the industrialisation process, increased
unemployment, decreased wages and increased inequality. Consequently, during the
1980s, the entire continent suffered a per capita growth rate of almost 0%, whereas in
previous decades it was consistently above 4%. The citizens of Latin America suffered from
lower living standards and, consequently, they turned against the IMF ‘outsiders’. Brazil
claimed that they would “never again sign agreements with the IMF”.

1. HISTORY OF BRAZIL
2. 2. 1981-1993 GDP ↑ at an avg. annual rate of 2.9% Per Capita Inc. ↓ 6% Gross investment ↓
from 21 to 16% Result of fiscal crisis & loss of Public sector investment. 1980s “LOST
DECADE” 1990s Reached a record of 5times of the rate in 80s
3. 3. The inflation rates as seen in the previous 2 tables are based upon the consumer price
index (CPI). The index is a measure of the average price which consumers spend on a
market-based “basket” of goods and services. Inflation based upon the consumer price index
 (CPI) is the main inflation indicator in most countries. The CPI inflation rates in the table are
presented both on a monthly basis, compared to the month before, as well as on a yearly
basis, compared to the same month last year.
4. 4. HYPERINFLATION
5. 5.  Brazil’s consumer prices remain under pressure mainly on an increase in transportation
prices, which has been fueled by higher public-transport fares in certain cities and increases
in gasoline prices.  In recent days, inflation in Brazil experienced an additional point of
pressure, with the Brazilian real trading at about 3.00 to the dollar. This marks the weakest
level of the local currency since 2004, as concerns about the struggling economy and
political problems pushed investors to buy dollars.  The monthly inflation data came above
expectations. Economists expected an increase of 1.01% to 1.21%, according to a survey by
The Wall Street Journal.
6. 6.  With faster price increases and the depreciation of the Brazilian real versus U.S. dollar,
analysts see room for the central bank to raise its benchmark interest rate even more. 
Brazil’s Annual Inflation Hits Highest Level In Nearly 10 Years  12-month consumer-price
index was up 7.70% through February  SÃO PAULO—Consumer prices in Brazil rose more
than expected in February, putting the 12-month rate at the highest level in nearly 10 years
and underlining one of the main challenges facing Latin America’s largest economy in the
year ahead.
7. 7. Effects of Hyperinflation in Brazil  Inflation rates were upto 3000% Ex: A $3.00 loaf of
bread costed $90+  People would get paid and the value of the paycheck would decrease
by 30% while it was in their pocket on the way to the bank.  The money stock was reduced
by 80%.  The public sector nearly lost all of its monetary value.  The new currency was
launched in 1994 and substituted the “cruzeiro real”: R$ 1,00 corresponded to CR$ 2.750,00.
The accumulated inflation until the implementation of real was of 815,60% and the first
inflation registered under the new currency was of 6,08%, a minimum record in many years.
 The currency of Brazil is –Real
8. 8. Year CPI ROI (%) 1980 4 100% 1981 8 100% 1982 16 100% 1983 38 138% 1984 111
192% 1985 362 226% 1986 895 147% 1987 2,940 228% 1988 21,435 629% 1989 328,113
1,430% Year CPI ROI (%) 1990 100,000,000 30,377% 1991 500,000,000 400% 1992
5,600,000,000 1,020% 1993 113,600,000,000 1,929% 1994 2,472,400,000,000 2,076%
1995 4,104,400,000,000 66% 1996 4,751,200,000,000 16% 1997 5,080,300,000,000 7%
Price Levels & Rate of Inflation in Brazil, 1980 to 1997
9. 9. The Hyperinflation in Brazil, 1980-1994 Hyperinflation in Brazil was a fourteen-year period
of three-to-four-digit annual inflation rates from 1980 until 1994.[1] It coincided with the
period of economic crisis and political turmoil triggered by the 1970s energy crisis during the
Brazilian military dictatorship until the conclusion of the main processes of the democratic
transition in the country in the late- 1980s/early 1990s.
10. 10.  The annual inflation by year for Brazil - comparing the December CPI to the December
CPI of the year before and the average inflation by year for Brazil  The average of 12
monthly inflation rates of a calendar year
11. 11. Table – historic inflation Brazil (CPI) – by year Annual inflation (dec vs. dec) Inflation
Annual inflation (dec vs. dec) Inflation CPI Brazil 2014 6.41 % CPI Brazil 2004 7.60 % CPI
Brazil 2013 5.91 % CPI Brazil 2003 9.30 % CPI Brazil 2012 5.84 % CPI Brazil 2002 12.53 %
CPI Brazil 2011 6.50 % CPI Brazil 2001 7.67 % CPI Brazil 2010 5.91 % CPI Brazil 2000 5.97
% CPI Brazil 2009 4.31 % CPI Brazil 1999 8.94 % CPI Brazil 2008 5.90 % CPI Brazil 1998
1.65 % CPI Brazil 2007 4.46 % CPI Brazil 1997 5.22 % CPI Brazil 2006 3.14 % CPI Brazil
1996 9.56 % CPI Brazil 2005 5.69 % CPI Brazil 1995 22.41 %
12. 12. Table: average inflation Brazil (CPI) – by year average inflation Inflation average inflation
inflation CPI Brazil 2015 7.92 % CPI Brazil 2005 6.88 % CPI Brazil 2014 6.33 % CPI Brazil
2004 6.60 % CPI Brazil 2013 6.21 % CPI Brazil 2003 14.78 % CPI Brazil 2012 5.40 % CPI
Brazil 2002 8.43 % CPI Brazil 2011 6.63 % CPI Brazil 2001 6.83 % CPI Brazil 2010 5.04 %
 CPI Brazil 2000 7.06 % CPI Brazil 2009 4.90 % CPI Brazil 1999 4.86 % CPI Brazil 2008 5.67
% CPI Brazil 1998 3.21 % CPI Brazil 2007 3.64 % CPI Brazil 1997 3.21 % CPI Brazil 2006
4.20 % CPI Brazil 1996 16.01 %
13. 13. What are the causes of Hyperinflation ?
14. 14.  The debt to GDP ratio (towards end of the year) was raised to 43.4 percent in contrast
to 43 percent last year.  Trade surplus (for 2007) was brought down to USD$40.95 billion
from USD$41.  The National Monetary Council has set Brazil inflation target at 4.5% for the
year 2007. The same target has been maintained for the year 2008. The inflation targets
should, however not be confused with the bank lending targets.  Estimated targets for the
CPI or the consumer price index for the year 2007 was reduced from 3.83% as compared to
3.86 %.
15. 15. Solutions to the Hyperinflation
16. 16. Brazil is the perfect example of what happens when you have corrupt government
officials & military regimes that are in charge. Our opinion is that if they had political stability,
hyperinflation wouldn’t have happened or at least to the degree that it happened.
17. 17. BY - Shresht Shetty (110) - Riya Sawant (93) - Sayli Shelar (104)

Latin America has suffered more than 2.5m murders since the start of this
century and is facing an acute public security crisis that demands urgent and
innovative solutions, a new report warns.

“The sheer dimensions of homicidal violence are breathtaking,” says the report by
the Igarapé Institute, a Brazil-based thinktank focused on security and
development issues.

The publication, released on Thursday, paints a bleak portrait of what it calls the
world’s most homicidal continent.

Latin America suffers 33% of the world’s homicides despite having only 8% of its
population. One-quarter of all global homicides are concentrated in four
countries – Brazil, Colombia, Mexico and Venezuela – all of which are gearing up
for presidential elections in which security is a dominant theme.
Mexico maelstrom: how the drug violence got so
bad

Read more

“The overall trend right now in Latin America is one of increasing homicides and
deteriorating security,” said Robert Muggah, one of the report’s authors.

“Latin America is a large area and there are lots of variations. But as a region –
including Mexico down to Central America and South America – the rate of
homicide is set to continue increasing up until 2030. The only other places we are
seeing similar kinds of increases are in parts of southern and central Africa and
some war zones.”

The report lays bare how young Latin Americans are disproportionately affected,
with nearly half of all homicide victims aged 15–29. It also denounces the
“astonishingly” large role of guns.

Muggah said: “In addition to having these exceedingly high, epidemic levels of
homicide, the vast majority of these homicides are committed with firearms. Over
75% of homicides are gun-related.” The global average is about 40%.

The security crisis has taken centre stage this year as the region’s most violent
nations head to the polls. Colombia and Venezuela are both due to hold
presidential elections in late May while Mexico, which last year saw its highest
murder rate since records began, votes on 1 July and Brazil in October.
Seeking to exploit public anger over insecurity and crime, some candidates are
floating radical responses. On Sunday, one Mexican presidential hopeful, Jaime
Rodríguez, suggested chopping off thieves’ hands. “It’s a serious proposal, not
something I’ve just pulled out of my sleeve,” he later claimed.

In Brazil, far-right candidate Jair Bolsonaro, an early presidential frontrunner,

has vowed to relax gun-control laws. “We must give everyone the right to carry a
gun, just like in the US,” he told O Globo this week. “We already have a ‘bang-
bang’ going on in Brazil but only one side is allowed to shoot.”

Muggah said he feared many voters would look to strongman-style populists

peddling “simple, forceful and aggressive solutions to what they see as one of
their primary problems”.

“There is a risk right now that Latin Americans are seduced by this narrative
of mano dura [iron fist]. [But] we will not solve this problem … by simply
throwing more police, longer sentences and more prisons at it.”

A recession is widespread economic decline that lasts for at least six months.
A depression is a more severe decline that lasts for several years. For example,
a recession lasts for 18 months, while the most recent depression lasted for a
decade.

There have been 33 recessions since 1854. There's only been one depression
since then, the Great Depression of 1929. It was actually a combination of the
recession that lasted from August 1929 to March 1933, and the one from May
1937 to June 1938. If you are wondering if we are in a depression or recession,
it's probably a recession.

In a recession, gross domestic product contracts for at least two quarters. But
that's not all. There are many more economic indicators that signal a recession.
That's because GDP growth will usually slow for several quarters before it turns
negative. That's in response to sluggish consumer demand.

A depression is an extended recession that has years, not quarters, of economic

contraction. It's more severe than a recession. Unemployment reaches 25%,
housing prices plummet 30%, and prices fall 10%. The devastation of a
depression is so great that the effects of the Great Depression lasted for decades
after it ended.
A depression on the scale of that in 1929 could not happen exactly the way it did
before. Central banks around the world, including the U.S. Federal Reserve, are
more aware of the importance of monetary policy in regulating the economy.

Follow the Great Depression Timeline to find out what caused the Depression,
how bad it was, and what finally ended it.

What Is Hyperinflation?
Hyperinflation is a term to describe rapid, excessive, and out-of-control price
increases in an economy. While inflation is a measure of the pace of rising prices
for goods and services, hyperinflation is rapidly rising inflation.

Understanding Hyperinflation
Hyperinflation occurs when prices have risen by more than 50% per month over
a period of time. For comparative purposes, the U.S. inflation rate as measured
by the Consumer Price Index (CPI) is typically less than 2% per year, according
to the Bureau of Labor Statistics. The CPI is merely an index of the prices for a
selected basket of goods and services. Hyperinflation causes consumers and
businesses to need more money to buy products due to higher prices.

Whereas normal inflation is measured in terms of monthly price increases,

hyperinflation is measured in terms of exponential daily increases that can
approach 5 to 10% a day. Hyperinflation occurs when the inflation rate exceeds
50% for a period of a month.

Imagine the cost of food shopping going from $500 per week to $750 per week
the next month, to $1,125 per week the next month and so on. If wages aren't
keeping pace with inflation in an economy, the standard of living for the people
goes down because they can't afford to pay for their basic needs and cost of
living expenses.

Hyperinflation can cause a number of consequences for an economy. People

may hoard goods, including perishables such as food because of rising prices,
which in turn, can create food supply shortages. When prices rise excessively,
cash, or savings deposited in banks decreases in value or becomes worthless
since the money has far less purchasing power. Consumers' financial situation
deteriorates and can lead to bankruptcy.

Also, people might not deposit their money, financial institutions leading to banks
and lenders going out of business. Tax revenues may also fall if consumers and
businesses can't pay, resulting in governments failing to provide basic services.
Why Hyperinflation Occurs
Although hyperinflation can be triggered by a number of reasons, below are a
few of the most common causes of hyperinflation.

Excessive Money Supply

Hyperinflation has occurred in times of severe economic turmoil and depression.
A depression is a prolonged period of a contracting economy, meaning the
growth rate is negative. A recession is typically a period of negative growth that
occurs for more than two quarters or six months. A depression, on the other
hand, can last years but also exhibits extremely high unemployment, company
and personal bankruptcies, lower productive output, and less lending or available
credit. The response to a depression is usually an increase in the money supply
by the central bank. The extra money is designed to encourage banks to lend to
consumers and businesses to create spending and investment.

However, if the increase in money supply is not supported by economic growth

as measured by gross domestic product (GDP), the result can lead to
hyperinflation. If GDP, which is a measure of the production of goods and
services in an economy, isn't growing, businesses raise prices to boost profits
and stay afloat. Since consumers have more money, they pay the higher prices,
which leads to inflation. As the economy deteriorates further, companies charge
more, consumers pay more, and the central bank prints more money—leading to
a vicious cycle and hyperinflation.

Loss of Confidence
In times of war, hyperinflation often occurs when there is a loss of confidence in a
country's currency and the central bank's ability to maintain its currency's value in
the aftermath. Companies selling goods within and outside the country demand
a risk premium for accepting their currency by raising their prices. The result can
lead to exponential price increases or hyperinflation.

If a government isn't managed properly, citizens can also lose confidence in the
value of their country's currency. When the currency is perceived as having little
or no value, people begin to hoard commodities and goods that have value. As
prices begin to rise, basic goods—such as food and fuel—become scarce,
sending prices in an upward spiral. In response, the government is forced to print
even more money to try to stabilize prices and provide liquidity, which only
exacerbates the problem.

Oftentimes, the lack of confidence is reflected in investment outflows leaving the

country during times of economic turmoil and war. When these outflows occur,
the country' currency value depreciates because investors are selling their
country's investments in exchange for another country's investments. The central
bank will often impose capital controls, which are bans on moving money out of
the country.

Example of Hyperinflation
One of the more devastating and prolonged episodes of hyperinflation occurred
in the former Yugoslavia in the 1990s. On the verge of national dissolution, the
country had already been experiencing inflation at rates that exceeded 75%
annually. It was discovered that the leader of the then Serbian province,
Slobodan Milosevic, had plundered the national treasury by having the Serbian
central bank issue $1.4 billion of loans to his cronies.

The theft forced the government's central bank to print excessive amounts of
money so it could take care of its financial obligations. Hyperinflation quickly
enveloped the economy, erasing what was left of the country’s wealth, forcing its
people into bartering for goods. The rate of inflation nearly doubled each day until
it reached an unfathomable rate of 300 million percent a month. The central bank
was forced to print more money just to keep the government running as the
economy spiraled downward.

The government quickly took control of production and wages, which led to food
shortages. Incomes dropped by more than 50%, and production crawled to a
stop. Eventually, the government replaced its currency with the German mark,
which helped to stabilize the economy.