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Comparison between the economic and social structures of two countries: Brazil and Chile (2007)

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Brazil and Chile do not have the same profile. Brazil has the fifth biggest global area with 8,514,877 square kilometers and has more than one hundred sixty million inhabitants, while Chile is ranked thirty-seventh with 756,950 square kilometers and a population of only fifteen million people. Populations of these two states do not have the same composition.

What brings these countries together is that they have both experienced a period of dictatorship, which was overthrown in the 1990s followed by crises that left them more or less drained. How have these countries experienced the opening of the economy? Has the strategy been successful? We analyzed the institutions of Brazil and Chile under the Braudel grid to answer these questions: How can these countries then illustrate the transition of a material culture to a market economy and capitalism?

Developments and price stability:
Two different countries affected by the debt crisis: The two countries are affected differently by the problems faced by Latin America during the the "lost decade" of the 1980s. Brazil saw its GDP virtually stagnate over the past ten years (-0.4% in 1989 relative to GDP in 1980) while Chile is one of the Latin American countries that suffered the least since this crisis; GDP growth of about 6-7% over the decade.

We can already note that it is this apparent success that will serve as a source of inspiration in the political after the debt crisis.First, it is necessary to explain the structural causes and triggers of such a geopolitical crisis.

Different choices out of the crisis:
Brazil declared insolvent in November 1982 and Chile is also facing serious financial difficulties. Scheduling of payments to countries are affected by the spiral of debt, the United States develop the Brady Plan in 1989.This solution is that Brazil has largely passed.

In contrast, Chile has followed a different path that is a securitization of its economy because even before the announcement of the plan it had already managed to substantially reduce its indebtedness in respect to the commercial banks. To attract new money, Chile has indeed released the bonds (securitization mechanism) with a handful of banks that have thus taken the long-term commitment to fund the country.

This decision represented an important step in Chile's return to the international capital market under the guise of the IMF and the IBRD that facilitated financial transactions. Since 1991, over 75% of companies in both countries are privatized. One of the other effects of the the debt crisis seems embodied in the situation of hyperinflation in Brazil (the index of consumer prices increased from 91.2% in 1981 to 1476% in 1989), and to a much lesser extent, Chile (the index goes about it by 9.5% in 1981 to 21.1% in 1989).

In Brazil, when Cardoso came to power in 1994, inflation reached almost2000%. However, wages do not follow the pace of inflation which leads to an increase in malnutrition. Therefore, an economic and monetary policy must be implemented to break the hyperinflation.

Tags: Brazil and Chile, hyperinflation, securitization, indebtedness, commercial banks, long-term commitment, IMF, IBRD, GDP, market economy and capitalism

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