1. 1995 ECONOMIC RESULTS

Inflation Down Sharply

Inflation dropped sharply in 1995. Prior to the Real Plan, inflation was around 50% per month. Regardless of the measure used, on average, inflation fell to an annual level of 20% in 1995, the lowest rate since the early 1970s. The 1996 inflation rate should be lower than last year, and the downward trend should continue in 1997.

GRAPHIC 2

Purchasing Power Up Noticeably

In 1995, the economy grew and purchasing power increased, especially among salaried workers and the lowest income sectors. The cost of the items in the basic "food basket", remained practically unchanged during 1995.

GRAPHIC 3

Food consumption grew, in general, by 30%. Egg consumption increased 16%; chickens, 16%; canned goods, 40%; frozen foods, 90%; and yogurt, 89%. These data reveal a growth in protein consumption as Brazilians are eating more and better.

There was an increase also in purchases of durable goods: refrigerators, almost 27%; color TVs, 23%; stoves, 28%; automobiles, 12%.

GRAPHIC 4

Per capita food consumption of most of the basic food items has been growing throughout the 1990s.

PER CAPITA FOOD CONSUMPTION - BRAZIL
(kg/person)

	Rice	Beans	Corn	Wheat	Meat
1990	76.0	16.4	171.4	51.2	49.9
1991	76.3	17.9	171.9	51.3	52.1
1992	75.9	18.7	190.8	49.9	51.3
1993	75.5	18.4	203.0	51.8	53.0
1994	75.2	20.8	213.0	49.6	54.3
1995	75.9	21.1	227.8	54.1	59.4

Source: CONAB/IBGE

Economy Expanding

The economy has been growing since 1993. The growth rate was 4.2% in 1993, 5.7% in 1994, and 4.2% in 1995. GDP is expected to rise 4.0% in 1996. After three years, from 1990 to 1992, during which Brazil experienced falling per capita income and annual inflation levels in excess of 1,000%, we should now have six years of growth from 1993 to 1998.

Per capita GDP, which has been growing also, increased 2.54% in 1995 even while the population expanded by about 1.4%.

GRAPHIC 5

The introduction of the Real initially stimulated the creation of new employment. The overheating of the economy at the beginning of 1995, combined with the Mexican crisis, however, made it necessary to moderate Brazil's growth rate. As a consequence of these contractionary measures, employment declined. Nevertheless, the 1995 unemployment level was lower than that of 1994. In fact, unemployment is at one of the lowest levels in recent Brazilian history and is below that of most developing countries.

GRAPHIC 6

Employment in Brazil should be considered from a national scope, not from a regional or sectoral view. In 1995, employment grew in the services sector and in agriculture; it fell in certain industrial sectors. On average, the rate of unemployment did not increase. Nevertheless, those who lost jobs in one sector did not necessarily find employment in another. Thus, the government is concerned not only about job creation, but also about job retraining. For that reason, in 1995 the National Program for Professional Development (PNQP-Programa Nacional de Qualificação Profissional) spent R$ 44.4 million to train 222,059 workers, two and a half times the number of workers trained in 1994 (90,000). The goal in 1996 is to train one million workers at a cost of R$ 290 million from the State Plans (Planos Estaduais) and an additional R$100 million from the Ministry of Science and Technology (FINEP-Financiadora de Estudos e Projetos).

The following 1995 employment and income data are also worth mentioning:

• Average real wages, per person employed, grew by 13% in 1995, as opposed to 5.4% in 1994 (source: IBGE);
• The minimum wage grew by 54% (from R$64.79 in July 1994 to R$100 in May 1995);
• By November 1995, unemployment insurance covered almost 4 million workers, at a cost of R$1.6 billion; and
• The Indentured and Child Labor Supervision Program (Programa de Fiscalização do Trabalho Escravo e Infantil) was introduced. In 1995, there were 11 investigations, and 849 infractions were discovered. Four companies were indicted, 83 indentured workers were released from their farm obligations, and 12 employment agents were arrested.

International Reserves Growing Rapidly

International reserves totaled US$38.8 billion in December 1994, an increase of 20.3% over 1993. After declining at the beginning of 1995 due to the Mexican crisis and to the foreign trade deficit during that period, reserves grew to US$51.8 billion in December 1995, an amount equivalent to 12.3 months of imports. This large increase demonstrates the confidence foreign investors have in the Brazilian economy.

INTERNATIONAL RESERVES IN THE CENTRAL BANK OF BRAZIL

End of period	International Liquidity
	US$ (millions)	Equivalence in Months of imports
1980	6,913	—
1981	7,507	—
1982	3,994	—
1983	4,563	3.5
1984	11,995	10.3
1985	10,482	9.6
1986	6,760	5.8
1987	7,458	5.9
1988	9,140	7.5
1989	9,679	6.4
1990	9.973	5.8
1991	9,406	5.4
1992	23,754	13.9
1993	32,211	15.3
1994	38,806	14.1
1995	51,840	12.3

Source: Central Bank