Glossary: guaraná (G)

The national currency. From 1960 to 1982 the guaraní remained pegged to the United States dollar at G126=US$1. Responding to the completion of construction of the Itaipú hydroelectric plant and lower commodity prices for soybeans and cotton, in July 1982 the Central Bank established a multitiered exchange rate system. The most favorable rate was reserved for the imports of certain state-owned enterprises and for external debt-service payments. Three other controlled rated were applied to imports of petroleum and petroleum derivatives; distribursements of loans to the public sector; and agricultural imports and most exports. Commercial banks set a fifth, free-market rate that governed most of the private sector’s nonoil imports. In early 1988, these five rated were G240=US$1, G320=US$1, G400=US$1, G550=US$1, and approcimately G900=US$1, respectively. The multitiered system constituted a massive subsidy to state-owned enterpreses. Central Bank losses in controlled exchange rate transactions accounted for nearly half of public-sector deficit in 1986. In July 1988, the Central Bank eliminated the two most favorable exchange rates; set G400=US$1 as the rate for imports of state-owned enterprises; external debt-service payments, and petroleum imports; and established G550=$US1 as the rate for disbursements for loans to the public sector, agricultural imports, and most exports. In January 1989, the Central Bank further devalued the guaraní by setting the controlled rates at G600=US$1 and G750=US$1 and also required petroleum imports to be paid at the higher rate. In early 1989, the free-market rate exceeded G1,000=US$1.

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