6 YEARS OF THE REAL PLAN GROWTH AND SOCIAL DEVELOPMENT

GROWTH The behaviour of the economy in 1999 was marked both by the reduced retraction of economic activity (lees than expected after the currency devaluation) and by the swift recovery of the physical industrial production in the second half of the year. In December, 1999, industry already showed a significant 8.8% growth, as compared with December, 1998. Despite the external crises of the last years, GDP has maintained a positive trend. From 1994 to 1999, GDP increased by 11.8% in real terms, which corresponds to an annual average growth rate of 2.3%. In contrast, in the six years prior to Plano Real (1988 a 1993), the annual average growth was of only 0.8%. By eliminating the effects of season variations, industrial production grew by 4% in the fourth quarter, in 1999, vis-à-vis the third quarter. The increase in the exports of manufactured goods contributed much for this recovery. In the first quarter of 2000, industrial production reached an accumulated growth of 6.6% as compared to the same period last year. This positive trend occurs in al branches of industry. Still in the first third of 2000, the increase in the production of durable consumer goods highlights, 19.7%, as well as that of intermediate goods, 7.9%. INVESTMENT A new cycle of investments is in course within the Brazilian economy. This cycle is primarily anchored on large projects in the automobile, steel, mining and paper-and-cellulose industries, as well as on the widening of the physical infra-structure. This fact can be seen by the increase in the rate of investments as a proportion of GDP, which has surpassed the 18.7% average in the period 1991/1993, moving to 20.7% in the period 1997/1999. The raise in the rate of investment of the economy, associated to the broadening of the horizon of entrepreneurial planning brought about by stabilisation, contributes to the sustainability of the growth of real product. The investment indicators show consistent signs of growth in the last months. The production of capital goods highlights, having grown by 6% in the first third of 2000 as compared to the same period in 1999. In 1999, the total disbursement of resources of the national Bank for Economic and Social Development (BNDS) to the transformation industry reached the highest volume in the last two years. The perspective indicates an even bigger increase this year. The participation of capital goods in the Country’s total imports increased in an impressive manner in the last years, which reflects the modernisation of the productive system and consequently the increase of productivity AGRICULTURE Brazil entered year 2000 with a record in the grain production with 85.7 million tons, which represents a 45% increase vis-à-vis the harvests in the early 1990s which were 58.9 million tons. The growth of Brazilian agriculture starting in 1990 was based particularly upon considerable productivity gains, especially in the grain sector. The average productivity of corn grew by 45%; that of rice by 74%; that of beans by 36%; that of soybeans by 23%, and that of wheat by 10%.   Main Agricultural Policy Measures The priority attributed to agriculture after Plano Real may be evaluated by a set of measures, amongst which the following are worth highlighting: a) the promotion of financial depuration of the rural sector, by means of: securitisation and extension of rural debts; the Programme for the Reinforcement of Agricultural and Animal-Husbandry Production Co-operative Organisations (RECOOP), geared to the re-financing of debts of the co- operative sector and to the financing of turnover capital and investments; b) the reduction of the "Brazil cost", emphasizing: the previous establishment of financial charges for rural credit, replacing the referential rate; the unburdening of the Tax on the Circulation of Merchandises and Services (ICMS) in exports of rural products, which increases the competitiveness of the national production. c) priority for small properties The Federal Government will assign funds of about R$ 11.5 billion to finance the 2000/2001 harvest, which represents a 36% increase vis-à-vis the R$ 8.3 billion scheduled for the previous harvest. It is worth mentioning that the programme for the recovery of pastures will count on R$ 400 million per year. In order to support the development of different sectors of agriculture, the Agricultural Plan contemplates new programmes, covering the whole country, such as programmes geared to fruit plantations, water and bee culture. To complement the goals of incentive to agriculture, the Brazilian Government has increased the limit of financing for rural credit, and has improved the conditions for the access to resources by farmers. To support the marketing of harvests, instruments such as Option Contracts, NPR, the Award for Production Transportation (PEP), Loans and Acquisitions of the Federal Government (EDF and AGF). Governmental initiatives have promoted appropriate levels of capitalisation in the rural sector. Thus, these initiatives have been decisive for the consistent increase of agricultural production and of the sector’s commercial surplus. This surplus grew from US$ 10.3 billion, in 1992, to US$ 13.4 billion in 1999.