By Colleen Hoffman

Problems with Brazil's economy seem to be shaping up and many have refocused their faith in the largest South American country.

Only a few months ago, Brazil was facing major economic problems, in a recession-like state. Brazil was not the only one effected by these problems, but the whole world's economy felt the crunch.

Now, just months after this crisis, Brazil is picking up the pieces of a shattered economy and doing quite well.

Leonardo Bonaparte, a Brazilian resident and dairy farm owner, said that he feels it is the strengths and efforts of the President of Brazil, Fernando Henrique Cardoso, who should be credited for these quick improvements. "Cardoso has really done a great job in helping stabilizing Brazil's economy," said Bonaparte.

Although Cardoso was aided by an international economy, he also made great strides on his own. According to The Washington Post, Cardoso "induced a legislature controlled by his political opposition to help control excessive government spending by enacting an important new tax on financial transactions at local as well as national levels."

Some of the other changes that will be taking place in Brazil include a reconstruction of the tax system, changes in the power of the federal and state governments, and further reductions of the bureaucracy. According to John Cooper, an international finance professor at SUNY Farmingdale, the developments in Brazil's economy can be seen as a major achievement. "I have seen several rapid changes in different economies across the globe before, but this situation in Brazil is quite shocking," said Cooper. "The Brazilian government, the people of Brazil and foreign markets have all contributed to the immense positive changes in the economy." It was only three months ago that the largest economy in Latin America was on the verge of an economic meltdown, creating a stir and concerns in markets around the world. According to The New York Times it is the consumers of Brazil that have helped control the economy. It has been reported that the consumers have been firm in their beliefs that if they refuse to pay for goods that have been marked up, the costs will remain steady. Bonarparte said that in a way the consumers have pushed the economy forward because they have refused to accept such price hikes. "The consumer has basically disregarded price increases by simply not paying extra. The economy has been forced to remain steady because of this denial and the result has only been positive for the entire system," said Bonaparte.

According to Bonaparte, due to an unstable and dropping currency, in January when the economy was at its worst, people began to handle their money differently. "On payday at the end of the week, people would cash and spend their paychecks as soon as possible, because each day the value of the money changed so dramatically, he said. "We had to spend our money immediately because of inflation and bank interest rates."

The financial crisis in Brazil, which began in January, caused a 40 percent decline in the country's currency, creating the new currency known as the real. The nation's central bank continues to buy and sell currency in the foreign-exchange market in hopes to change the value of the real. Bonaparte said he feels that because Cardoso implemented this new currency, he again helped the economy in a positive way. "The way that Cardoso was successful in changing the luck of the economy so quickly and effectively, was creating the real," said Cardoso. Within the past month, investors have changed their views on the market in Brazil, keeping their money there because of a rapid decrease in interest rates.

According to Bonaparte, the scare that was so relevant in the past few months no longer stands. "Most investors who two months ago were ready to pull everything out of Brazil, were relieved and shocked at how rapidly the crisis diminished," he said. "Brazil came so close to hitting rock bottom, but the economy is back on track." According to The New York Times, the stock market has risen 50 percent from close to record lows reached in the beginning few days of the crisis, to almost matching their loses. Recent international confidence in Brazil's economy has encouraged the Brazilian government to remain in international capital markets. This would have been almost impossible just a few weeks ago. Just last week, Brazil sold 2 billion dollars worth of five-year notes to interested foreign markets.

Cooper said that he feels the market will only continue to prosper. "The Brazilian market has caused quite a stir," he said. "Brazil is the hot topic in a financial sense all over the world today." It has been reported that the value of state owned businesses have also risen. Last week a local gas company was auctioned for one billion dollars, double the anticipated price.

As far as other South American economies are concerned, most are expecting a positive growth. Countries in South America that recently turned to the World Bank for aid such as Mexico, Chile, and Argentina, possess economies that are beginning to flourish with the recent changes in Brazil.

Just last week, the real strengthened to a 4-month high and the central bank made another series of interest rate cuts because of the growth and trust in the economy. In the past couple of days, Brazilian banks have sold bonds abroad to international investors for the first time since last summer.

According to James Galbraith, professor of Latin Studies at the University of Texas, Brazil is doing a good job keeping foreign markets interest in Brazil. "Foreign markets are keeping a close eye on Brazil and other Latin American markets," said Galbraith. "International markets are holding tight to the expectation that their investments in the country will pay off." The problems that were so severe back in January and February have been replaced with a more prosperous feeling. These problems are swiftly diminishing and have paved the way for a strong economic standing and future expectations. Brazil is now realizing though, that although the country is working its way through the immediate crisis, there still remains many pieces of the problem that are going to take more time to completely overcome.

Cardoso said in a recent interview in the New York Times, he feels that the country is overcoming the crisis but realizes there are follow up steps to be taken in order to reassure the economy doesn't fall into the same pattern. "I suppose we are entering the end of the hurricane," said Cardoso. "My feeling is that we are overcoming it."