| HBS Case Collection
(Revised from original 2001 version)
Power to the States: "Fiscal Wars" for FDI in Brazil
On January 6, 1999, Itamar Franco, the governor of the state of Minas Gerais, the second-largest state in Brazil, declared a 90-day moratorium on its debt payment to the federal government. The announcement triggered a run on the Brazilian currency, the Real, and threatened the macroeconomic stability carefully constructed by President Fernando Henrique Cardoso since 1993. Confidence in the country on the part of foreign investors was badly shaken. This case traces the origin of this crisis.
Risk and Uncertainty;
Foreign Direct Investment;
Borrowing and Debt;
Alfaro, Laura, Yasheng Huang, and Marios S. Kalochoritis. Power to the States: "Fiscal Wars" for FDI in Brazil. Harvard Business School Case 701-079, February 2004. (Revised from original March 2001 version.)