Macroeconomics Case Study

Brazil ’s Dilemma: Forests or Foreign Exchange?

OR

Abstract:
The Amazon forests of Brazil are the world's largest rainforests. But in the last three decades huge areas of the Amazon basin have been deforested. During the 1970s and the 1980s, the government introduced policies, like provision of subsidised loans, providing easy credit and cutting of import duties, which encouraged cattle ranchers to settle in the Amazon region. As the number of cattle ranchers increased, the areas of deforestation also rose in the Amazon basin. After the devaluation of the real in 1999, the international demand for Brazilian beef grew. Increasing exports of cattle beef helped Brazil to accumulate comfortable levels of foreign reserve and to maintain the exchange rate of the real.

Pedagogical Objectives:

To discuss the situation faced by the Brazilian government, wherein it has to decide between preserving the Amazon forests and increasing its foreign reserve.

Keywords : Brazil's forests, foreign exchange, Business Environment Case Study, Cattle beef, cattle ranchers, Agricultural products, Domestic demand, Environmental organisations, Deforestation, Brazil exports and imports, Tax cut programmes,Government and Business Environment Case Study, World Resources Institute, Amazon forests, Brazilian Agency for Forestry and Environmental Affairs, Devaluation of the Mexican peso, Centre for International Forestry Research, Brazil's economy, balance of payments, Fernando Henrique Cardoso