Essence and Impact of Brazil's Financial Turmoil 　　This article, written by Zhu Min, director of the International Finance Research Institute of the Bank of China, analyzes Brazil's financial situation as follows: Brazil's financial market has experienced drastic turmoil and the exchange rate of its currency real to the US dollar has fallen steeply. Influenced by Brazil's financial turbulence, the global stock market has fluctuated for some time. At present, people are generally concerned about the question as to whether Brazil's financial turmoil will further trigger global financial and economic crisis. 　　Brazil is a typical high-consumption, high-deficit and high-foreign debt Latin American economy. 　　The Asian financial crisis and the Russian crisis have dealt a heavy blow to investors' confidence in the newly-emerging market, Brazil has also been deeply affected. After Russian crisis occurred last August, the outflow of Brazil's capital reached US$35 billion, its foreign exchange reserve dropped to US$42 billion at the end of last year. The crisis has caused the price of primary products to drop by a big margin, whereas Brazil's raw material export is the main pillar of its economy, as income from the export of Brazil's raw material decreased, its trade deficit increased. The two brought pressure on the devaluation of its currency real. Brazil's financial turmoil was caused by the currency crisis resulting from the change of its managed fixed exchange rate system to the floating exchange rate system. Up till now, although Brazil's currency continues to depreciate and its capital continues to flow out, the situation in which currency crisis and banking crisis has not emerged in Brazil as in the case of the financial crisis of Mexico, Thailand and Russia. 　　The Brazilian government has taken active move to cope with its currency devaluation. The United States and the international community have given Brazil effective and rapid support to protect the stability of Brazil's backyard financial market. 　　In view of the above-mentioned factors, Brazil's financial market fluctuation will continue, but will not completely deteriorate. 　　Brazil's financial turbulence affects the globe mainly through the following channels: As a regional large country, it exerts direct influence on the financial economy of the Latin American region; due to its close ties with the United States, it directly affects US financial economy and thereby indirectly affecting the global financial economy; because it follows in the footsteps of Asia and Russia, it influences in conception the investors' confidence in investment in newly emerging economy and type-transformation economy. 　　In 1998 Brazil's economic growth was only 0.5 percent, it will enter into economic depression in 1999, It is estimated that Brazil's economic growth is likely to stand at -4 percent to -6 percent. The declining Brazilian economy will exert serious negative influence on the Latin American economy and the US economy, thereby bringing greater uncertainty on this year's development of the global economy which has been beset with difficulties. Economicnews 1999-02-23 Page7 Full Story in Chinese