The colossal size of Brazil gave the Brazilian State a difficult problem of promoting communication and transportation amongst the various parts. Private industry was not likely to remedy the transportation problem so the Brazilian State was forced to get directly involved in the economy. It is difficult to raise funds by taxation in Latin America and governments often resort to funding their expenditures by increasing the money supply. This leads to inflation and Brazil experienced chronic inflation at high levels for decades. Brazil tried to avoid the consequences of inflation by creating an indexing program that would make the nominal amount paid back on a loan equal to the real value that would have to have been paid back if there had been no inflation.
| Per Capita Income of States, 1960 |
|
|---|---|
| STATE |
Percentage of the National Average |
| Amazonas | 68 |
| Para | 56 |
| Maranhao | 34 |
| Piaui | 29 |
| Ceara | 45 |
| Rio Grande do Norte | 57 |
| Paraiba | 54 |
| Pernambuco | 60 |
| Alagoas | 51 |
| Sergipe | 55 |
| Bahia | 56 |
| Minas Gerais | 71 |
| Espirito Santo | 64 |
| Rio de Janiero | 95 |
| Guanabara | 291 |
| Parana | 111 |
| São Paulo | 178 |
| Santa Catarina | 90 |
| Rio Grande do Sul | 120 |
| Alta Grosso | 78 |
| Goias | 55 |
The ratio of the per capita income of the richest state, São Paulo (leaving aside Guanabara which is the Federal District), is over six times the per capita income of the poorest state, Piaui. The states of the northeast generally have per capita income that are one half of the national average.
Regional policy in Brazil usually has an element of opening up frontiers, not only as a safety valve for the problems of the poorer areas but also as a means of establishing Brazilian control over territory that is only nominally Brazilian.
SUDENE quickly became a major element in the regional economics of Brazil. By the mid-1960's it had a staff of over three thousand. It worked with the Banco do Nordeste, a regional development bank. It instituted a series of three-year master plans.
In 1966 SUDAM, (Superintendencia do Desinvolvimento da Amazonia, was created out of a previous agency SPVEA (Superintendencia para Valorizacó Economico do Amazonia.