Brazil in the 1997-1999 Financial Turmoil

Project Directors: Martin Feldstein and Jeffrey Frankel
Eduardo Loyo and Andrés Velasco, Program Chairmen

FRIDAY, APRIL 14

6:00 PM Reception and Dinner

Royal Sonesta Hotel

Dinner Speaker: ARMINIO FRAGA NETO, Central Bank of Brazil

SATURDAY, APRIL 15

8:30 AM Continental Breakfast

9:00 AM Opening Remarks

9:15 AM Session 1: Background: disinflation and exit strategy

Chair: JEFFREY FRANKEL, Harvard University and NBER

Panelists: EDMAR BACHA, BBA Securities
GUSTAVO FRANCO, PUC-Rio and Rio Bravo Securitas
JOHN WILLIAMSON, Institute for International Economics

Disinflation and the causes of real appreciation: inflation inertia versus nominal appreciation. The choice of a gradual realignment strategy, as opposed to a prompt realignment or a totally fixed exchange rate. The costs of realigning slowly (fiscal, level of activity). The perceived benefit of gradual realignment in terms of avoiding a persistent inflation backlash.

10:45 AM Break

Brazil Program

11:00 AM Session 2: Crisis and defense

Chair: ANDRÉS VELASCO, New York University and NBER

Panelists: LUIZ CORREA DO LAGO, PUC-Rio
PETER GARBER, Deutsche Bank

THOMAS GLAESSNER, World Bank

Was the 1998 impact on Brazil an example of pure contagion? Was the G-7 "playing for time," and did it work? How exposed was Brazil to speculative attacks, compared to other crisis countries? Did it stand a better chance of defending the peg with high interest rates? The health of the financial system, the public debt problem, capital account freedom, and the "narrow exit door" argument. Would a firmer commitment to the peg have avoided the devaluation? Did Brazil fold under overwhelming external pressure or did it invite the attack with its indecisiveness? What have we learned about the value of 'preventive' rescue packages?

12:30 PM Lunch

1:45 PM Session 3: What would fiscal retrenchment have accomplished?

Chair: EDUARDO LOYO, Harvard University

Panelists: ELIANA CARDOSO, The World Bank
MARCIO GARCIA, PUC-Rio
PAULO LEME, Goldman Sachs & Co.

Was it all a fiscal problem? Fiscal retrenchment and domestic absorption. Fiscal retrenchment and the dynamics of public debt. Could fiscal retrenchment have avoided the devaluation? Public debt management under external speculative pressure.

3:15 PM Break

3:30 PM Session 4: Devaluation and fallout

Chair: MARTIN FELDSTEIN, Harvard University and NBER

Panelists: SUMAN BERY, World Bank
ILAN GOLDFAJN, PUC-Rio
NOURIEL ROUBINI, Treasury Department and NBER

Why has pass-through been so small? Why has the contractionary impact of the devaluation been so small? How fast could interest rates be reduced? Was it worth defending the peg for so long? What would have been the outcome of letting go earlier? The impact of devaluation in the region.

5:00 PM Adjourn

PAUL KRUGMAN, MIT and NBER
Latin America's Swan Song

ANDRES VELASCO, New York University and NBER
Delicate Balance

JEFFERY SACHS, Harvard University and NBER
Brazil Fever: First, Do No Harm

RUDI DORNBUSCH, MIT and NBER
Brazil's Incomplete Stabilization and Reform

ELIANA CARDOSO, The World Bank
ANN HELWEGE, Tufts University
Currency Crisis in the 1990s: The Case of Brazil

AFONSO S. BEVILAQUA and MARCIO G.P. GARCIA, Pontifical Catholic University of Rio de Janiero (PUC-Rio)
Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead