You are an IMF official going to a country whose export earnings are not able to pay for imports. The government has requested a loan from the IMF. Which areas would you recommend the government to cut: (1) education, (2) salaries for officials, (3) food subsidies, and/or (4) tax rebates for exporters?

Case is below;

Jobek's plant in 2010 outsourced production to Reed Isaac, a former local partner closed down the German unit: and signed a long-term supply contract with Stern GmbH in Germany. The measures were necessary to refocus the business and anve down costs. After more than a decade of high inflation, low growth, debt default and failed stabilization policies the Brazilian government introduced a new currency the real (BRL), in 1994. The new currency. Initially val- ued at BRL1 per US$, was pegged to the US dollar... and could oscillate within an adjustable band unti 1999. Then, subject to central bank interventions, the real depreciated rapidly and reached BRL2.25 per dollar in January 2002. During the presidential carn- paign of 2002. investors got increasingly concerned about the likely policies of the likely winner and drove down the value of the real to BRL3.83 per dollar by October 2002. The BRL euro exchange rate evolved Similarly (see Figure 73). However, Lula's govem ment soon gained the confidence of international financial markets by pursuing conservative fiscal and monetary policy. After paying back its last IMF Toan in 2005, the country obtained investment grade rat- ing in 2008. The international financial markets honda oured that and billions of US dollars poured into the country over the next years. This macroeconomic stabilization, however, came at a cost the BRL con tinuously appreciated from 2004 and about 2700 (12%) exporters quit international markets between 2004 and 2011. However, Jobek did not want to give up on exports.it had built up a strong premium brand, especially in Germany, associating Jobek with Latin American lifestyle, as well as social responsibility and high quality. Selling the rights to the brand in Europe to Stem was a hard decision. Now, Stern owned the rights of the Jobek brand for Europe, while Barny maintained the rights for the rest of the world. In exchange, Stem committed to buying all products it sold under the Jobek brand from Barny for the next ten years. Barny approached Jobek's account managers Banco do Brasi, Brazil's largest and partly state. owned bank, and asked them to make an offer for a swap contract over BRL1 million. After six months, Barny ste had not received the contract, and grumbled that there in the northeast of Brazil, they are 20 years back in some areas". Indeed, hedging the exposure to the euro a sometimes a problem in a country where, according to a financial nsk consultant. the US dollar is still a synonym for foreign exchange More black chocols moved across the horizon and tapped the usually surong sunshine in Brazil's north- With the audiin its deepest crisis since its intro- duction in 2002 may taared that quantitative easing De su to get rid of the eurozone's mounting debt. Bamy read an article alon Econmico: "Dilma pasident sent a message e demain chancellor complain- ing about the monetary Insunami' that is threatening other emerging economies with Figure 7.3 Exchange rate! BRL/C from 2008 to 2015 18 18 Niss 2.0 2014 2008 2009 2010 2011 A sources authors testion is worse a su turnper carve Bank 2012 2013 Out Mar 2015, cheap money made avaiable by the European Central CASE DISCUSSION QUESTIONS Bank. in fact, Brazit was attracting foreign money as How do you evaluate Jobek's situation from the hoverbetore and received a record amount of FDI of resource-based and instution-based views 7 Why US$66 bilion in 2011 have resources and institutions hindered Barny Batty complained that with the resulting real from coping with the foreign exchange situatien, appreciation our clents are not very happy. He glede but smultaneously helped him to turn is com On November 29, 2011, Sten placed an order based Dary around? on an exchange rate of BRE2 49 per euro. Today How do you evaluate Jobok's strategic response March 2, 2012. the euro dropped to BRL2 29. tatis to fore gn exchange risks? an appreciation of about 10% in a very short period, What would you do if you were Barny? Why? The only way we can sell our products is because we Dave a strong brand name. The telephone ringing interrupted Barry's theug 15. W ty Dirk Mche Boche I was jedo Gonalves, the boss at Roed isasc, shout! A ls laat on the Mews, ing through the handset YOUR am very on robe Us W ony Cenul www.reebr cerned with the high rhinemum wage increases U S M E D WWW.BE GOL Mrs Dilma Roussef has pushed through congress, not 5E Paco Werter 2017 to mention we ever rising tax charges Wetan nardy B iker. A cik. D ie Ehs, Warch www. sa e look survive at susn costs and lan sorry but I need to takto kazen te b o reness 2012 Payung you about a once adestment Although aisappointed; Bany politely asked Joo is he would ketonave lunch chi n 2012. Dre Tam a rah together. Then Bemny seratched his head on how he SENGE was respond to Jodo's tequest Overgach 20 1 3. Warnecane 061322