Brazil's efforts to float the Real and deal firmly with fiscal problems in 1999 reaffirmed its place as the darling of foreign direct investors in Latin America during 2000, a trend that will continue for the next two years. The economy is growing faster than expected and the country appears headed for a solid recovery.

Almost predictably, however, the Brazilian government continues to struggle with chronic public deficits and an arcane tax regime. The lack of solid policies for industrial development and regulation of foreign direct investment are hampering competitiveness. Leaving this flank exposed undermines the country's export potential and perpetuates the current account deficit.