The challenges of retail in the brazilian economy

UP:30/10/2012-15:49:38 WM:30/10/2012-15:49:42 M:BE951-7-AU A:12a1 R:1202447 C:AF8615F463862EDC66B206B43FAD750220CEB56D

Assessed coursework one

BE951 Research Methods and Methodologies in Accounting and Management

Session 2012/13 Autumn Term Eduardo Antonio Lafayette de Almeida Msc. Finance and Management (LAFAY84201)

The challenges of retail in the Brazilian economy
UP:30/10/2012-15:49:38 WM:30/10/2012-15:49:42 M:BE951-7-AU A:12a1 R:1202447 C:AF8615F463862EDC66B206B43FAD750220CEB56D

During the 1990’s, the Brazilian economy went through many changes, the most significant of them being the stabilization of inflation and the opening of the market to foreign enterprises. Before the first half of the 1990’s, Brazil faced a hyperinflation-when the prices during a period of thirty days increases fifty percent or more for at least a year or longer (Cagan, 1956). Geier (1996) states that this Brazilian hyperinflation was one of the worst economic crisis to ever occur in Latin American history, reaching 5,500 percent p.a in 1994. The only countries to have reached similar numbers were Bolivia in 1985 (11,749 percent p.a) and Nicaragua in 1988 (10,205 percent p.a), (Wit and Dyk, 1996). This led to odd activities in retail - at least in the eyes of one that has never lived in a hyper-inflated environment - such as the selling of merchandise below cost price, in order to invest the money in the high yield money market (Wit and Dyk, 1996). As Geier (1996, p50) describes it, “Doing business was certainly dramatic, since the situation you thought you were facing when you went to bed could easily have changed dramatically by the time you woke up.” Complementing the latter statement, Franco (2000, p2) adds that: “Hyperinflation is a rare disease seen in only a dozen or so episodes in human history, almost always in the presence of gigantic dislocations such as wars or revolutions”. In this environment, the concept of price is lost by the consumer and many