Lessons for SA: Brazil set for new type of currency crisis
EDINBURGH — Brazil is in a corruption-induced mess that has been compounded by policy errors. Sounds a lot like South Africa, where Zuma-instituted graft has eaten away the gains of the Mandela-led years and self-interest has distracted leaders from the task of fixing the economy. The Economist outlines how government decision-making and politics play into different types of currency crises. Brazil can prevent the worst if its leaders take action now, it notes. – Jackie Cameron
By Thulasizwe Sithole
There are three types of currency crises, observes The Economist. The pre-1990s kind is slow, starting with an overvalued exchange rate, which gives rise to a trade deficit. Foreign-exchange reserves are gradually run down to pay for it and, when they are gone, the game is up.
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