What was the Caipirinha Crisis, the economic collapse that began in Brazil and was felt strongly in Argentina

In 1999, Brazil crossed one of the worst economic crises in historycaused both by various crises in other countries and by internal political decisions and inflation that did not stop growing.

This situation was called Capirinha Crisisfollowing the famous Tequila Crisis, to understand that the Brazilian economy was shaky, just like a drunk. On the other hand, this crisis affected its neighboring countries, mainly Argentina.

This is how Brazil was before the Caipirinha Crisis

In the 1980s and 1990sBrazil suffered from a high inflation and devaluation of its own currencywhich was attempted to be regulated with exchanges of various national currencies, which ended up generating distrust in international agents.

This is how we finally reached the realthe current currency of Brazil, which replaced the cruzeiro and the cruzeiro at that time.

However, the final blow was received from outside, since The crisis originated from the fall of other countries, such as Mexico and Russia, with its so-called Vodka effect, a product of the financial crisis in Asian countries that began in 1997..

What was the Caipirinha Crisis

This is how it came 1999a year in which the president of that time, Fernando Henrique Cardosomade the decision to devalue the real against the dollar. This was done with the aim of increase the competitiveness of Brazilian products.

But everything got worse; capital flight, drop in the level of activity and public accounts in the red. And what’s more: the crisis caused a rebound effect in Argentina, where exports to Brazil fell and had a negative impact on the local economy.

Caipirinha Crisis: the consequences in Argentina

Argentina was the next piece of the economic domino that was sweeping the world. In fact, due to the Caipirinha Crisis, Sectors such as automobiles, textiles, footwear, dairy, electrical machinery, plastics, fresh fruits and tires were terribly affected, since they depended on the Brazilian market..

The drop in activity caused an increase in fiscal deficitand none of the Argentine presidents of that time –Carlos Saúl Menem (1989-1999) and Fernando De La Rúa (1999-2001)– devalued the peso, which concluded in the crisis of 2001.