Brazil Currency Crisis

About Brazil Currency Crisis

In January 1999, Brazil was forced to devalue the real, triggering a currency crisis. The real lost 40 percent of its value. The crisis spread to other emerging markets in the so called samba effect. Brazil had maintained a crawling peg against the dollar that became unsustainable after the Asian and Russian crises. The IMF provided a 41 billion package. Brazil recovered relatively quickly under the leadership of Central Bank President Arminio Fraga, who had previously worked for George Soros. The crisis demonstrated the vulnerability of large economies to sudden capital flight. Brazil later emerged as a relatively stable emerging market, though it continued to experience boom and bust cycles.