This paper applies to the analysis of the interstate income distribution in Brazil a set of techniques that have been widely used in the current empirical literature on growth and convergence. Usual measures of dispersion in the interstate income distribution (the coefficient of variation and Theil's index) suggest that sigma-convergence was an unequivocal feature of the regional growth experience in Brazil, between 1970 and 1986. After 1986, the process of convergence seems, however, to have slowed down almost to a halt. A standard growth model is shown to fit the regional data well and to explain a substantial amount of the variation in growth rates, providing estimates of the speed of (conditional) beta-convergence of approximately 3% p.a. Different estimates of the long-run distribution implied by the recent growth trends point towards further reductions in the interstate income inequality, but also suggest that the relative per capita incomes of a significant number of states and the number of 'very poor' and 'poor' states were, in 1995, already quite close to their steady-state values.

RESUMO O objetivo deste artigo é atualizar a análise do processo de convergência da renda per capita do estado no Brasil, utilizando novos dados para o período 1986-1995. Os índices L e T de Theil são usados para mostrar que o processo de convergência, observado entre 1970 e 1985 e relatado em trabalhos anteriores, parou desde 1987. Algumas explicações possíveis para esse resultado também são exploradas.

From the monetary reform of July  until January  Brazil followed the policy of pegging the new currency (the real ) to the US dollar. The central rate was initially fixed at  :  to the US dollar, but no fluctuation band was set and the market rate was allowed to fluctuate substantially. After a sharp appreciation of up to  per cent the real remained at a premium to the dollar for two years (until June ). In March , following the Mexican crisis, the Banco Central do Brasil adopted a crawling band without preannounced depreciations. This change in policy was meant to increase somewhat the flexibility of the exchange rate regime while still maintaining an anchor for inflationary expectations. The market rate depreciated by n per cent in the course of  (December  on December ), n per cent in , n per cent in  and n per cent in . By December  it had reached n to the US dollar, a depreciation of only  per cent with respect to the central rate fixed at the end of the hyperinflation but about  per cent with respect to the rate prevailing in July .During the four and a half years from July  to the end of  the price index for non-traded goods increased by  per cent, and the price index for traded goods increased by about  per cent. This resulted in an enormous loss of competitiveness of Brazilian exports on world markets, a substantial worsening of the current account which moved from a surplus of  per cent of GDP in  to a deficit of n per cent in  (both were recession years) and a significant increase in the Brazilian foreign debt both private and public. Worst of all, Brazil's growth rate

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