Economy of Brazil

style="background:#f0f0f0;" align="left" valign="top"|2004

| style="background:#f0f0f0;" valign="top"| 5.7% |- !align="left" valign="top"|2005 |valign="top"| 3.2% |- ! style="background:#f0f0f0;" align="left" valign="top"|2006 | style="background:#f0f0f0;" valign="top"| 3.7% |- ! style="background:#f0f0f0;" align="left" valign="top"|2007 | style="background:#f0f0f0;" valign="top"| 5.1% |- ! style="background:#f0f0f0;" align="center" valign="top" colspan="2"|Source: |- | align="center" bgcolor="lightblue" colspan="2"| |} Brazil has a moderately open market and export-oriented economy. Measured nominally, its Gross Domestic Product surpasses a trillion dollars, and $2,06 trillion in purchasing power parity, making it the sixth largest economy in the world and the third largest in America. Its nominal per capita GDP has repassed $6,000 in 2007, due to the strong and continued appreciation of the real for the first time this decade. Its industrial sector accounts for three fifths of the South American economy's industrial production. The country’s scientific and technological development is argued to be attractive to foreign direct investment, which has averaged US$ 20 billion per year the last years, compared to only US$ 2 billion/year last decade, thus showing a remarkable growth. The agricultural sector, locally called the agronegócio sector, has also been remarkably dynamic: for two decades this sector has kept Brazil amongst the most highly productive countries in areas related to the rural sector. The agricultural sector and the mining sector also supported trade surpluses which allowed for massive currency gains (rebound) and external debt paydown.

Brazil is a member of diverse economic organizations, such as Mercosur, SACN, G8+5, G-20 and the Cairns Group. Its trade partners number in the hundreds, with 74% of exports mostly of manufactured or semimanufactured goods. Brazil's main trade partners are: the EEC (26% of trade), the United States (24%), Mercosur and Latin America (21%) and Asia (12%).

The owner of a sophisticated technological sector, Brazil develops projects that range from submarines to aircraft and is involved in space research: the country possesses a Launching Center for Light Vehicles and was the only country in the Southern Hemisphere to integrate the team responsible for the construction of the International Space Station (ISS). It is also a pioneer in many fields, including ethanol production.

Brazil is also a pioneer in the fields of deep water oil research from where 73% of its reserves are extracted. According to government statistics, Brazil was the first capitalist country to bring together the ten largest car assembly companies inside its national territory.

History

Main article: Economic history of Brazil

When the Portuguese explorers arrived in the 15th century, the native tribes of current-day Brazil, totaling about 2.5 million people, had lived virtually unchanged since the Stone Age. From Portugal's colonisation of Brazil (1500-1822) until the late 1930s, the market elements of the Brazilian economy relied on the production of primary products for exports. Within the Portuguese Empire, Brazil was a colony subjected to an imperial mercantile policy, which had two main large-scale economic production cycles - sugar and gold. The economy of Brazil was heavily dependent on African slave labour until the late 19th century (about 3 million imported African slaves in total). Since then, Brazil experienced a period of strong economic and demographic growth accompanied by mass immigration from Europe (mainly from Portugal, Italy, Spain and Germany) until the 1930s. In the Americas, the United States, Argentina and Brazil (in descending order) were the countries that received most immigrants. In Brazil's case, statistics show that 4.5 million people emigrated to the country between 1882 and 1934.

Currently, with a population of 190 million and abundant natural resources, Brazil is one of the ten largest markets in the world, producing tons of steel, 26 million tons of cement, 3.5 million television sets, and 3 million refrigerators. In addition, about 70 million cubic meters of petroleum were being processed annually into fuels, lubricants, propane gas, and a wide range of petrochemicals. Furthermore, Brazil has at least 161,500 kilometers of paved roads and more than 63 million megawatts of installed electric power capacity.

Despite these figures, the economy cannot be considered developed. Although the economic changes since 1947 greatly raised the country's per capita income, in 1995 was still only US$4,630. Growth and structural change have not altered significantly Brazil's extremely unequal distribution of wealth, income, and opportunity. Despite impressive increments in economic growth and output, the number of poor has risen sharply. Most of the poor are concentrated in the rural areas of Brazil's Northeast Region, or in the country's large cities or metropolitan areas. The economic and political troubles of the 1980s and early 1990s have only complicated the task of correcting the country's development pattern.

Components of the economy

The service sector is the largest component of GDP at 65%, followed by the industrial sector at 25% (2003 est.). Agriculture represents 10% of GDP (2003 est.). Brazilian labor force is estimated at 92.86 million of which 19% is occupied in agriculture, 15% in the industry sector and 66% in the service sector.

Agriculture and food production

Agriculture production
Combine harvester in the plantation
Main products	Coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, citrus, beef
Agriculture growth rate	5.2% (2004)
Labor force	19% of total labor force
GDP of sector	10.1% of total GDP

Main article: Agriculture in Brazil

A performance that puts agribusiness in a position of distinction in terms of Brazil’s trade balance, in spite of trade barriers and subsidizing policies adopted by the developed countries.

In the space of fifty five years (1950 to 2005), the population of Brazil grew by 51 million to approximately 180 million inhabitants, an increase of over 2% per year. In order to meet this demand, it was necessary to take the development of cattle and crop raising activities a step further. Since then, an authentic green revolution has taken place, allowing the country to create and expand a complex agribusiness sector. However, some of this is at the expense of the environment, including the Amazon.

The importance given to the rural producer takes place in the shape of the Agricultural and Cattle-raising Plan and through another specific program geared towards family agriculture (Pronaf), which guarantee financing for equipment and cultivation and encourage the use of new technology, as shown by the use of agricultural land zoning. With regards to family agriculture, over 800 thousand rural inhabitants are assisted by credit, research and extension programs. The special line of credit for women and young farmers is an innovation worth mentioning, providing an incentive towards the entrepreneurial spirit.

With The Land Reform Program, on the other hand, the country’s objective is to provide suitable living and working conditions for over one million families who live in areas allotted by the State, an initiative capable of generating two million jobs. Through partnerships, public policies and international partnerships, the government is working towards the guarantee of an infrastructure for the settlements, following the examples of schools and health outlets. The idea is that access to land represents just the first step towards the implementation of a quality land reform program.

Over 600,000 km² of land are divided into approximately five thousand areas of rural property; an agricultural area currently with three borders: the Central-western region (savanna), the Northern region (area of transition) and parts of the Northeastern region (semi-arid). At the forefront of grain crops, which produce over 110 million tonnes/year, is the soybean, yielding 50 million tonnes.

In the bovine cattle-raising sector, the “green ox”, which is raised in pastures, on a diet of hay and mineral salts, conquered markets in Asia, Europe and the Americas, particularly after the “mad cow disease” scare period. Brazil has the largest cattle herd in the world, with 198 million heads, responsible for exports surpassing the mark of US$ 1 billion/year.

A pioneer and leader in the manufacture of short-fiber timber cellulose, Brazil has also achieved positive results within the packaging sector, in which it is the fifth largest world producer. In the foreign markets, it answers for 25% of global exports of raw cane and refined sugar; it is the world leader in soybean exports and is responsible for 80% of the planet’s orange juice, and since 2003, has had the highest sales figures for beef and chicken, among the countries that deal in this sector.

Industry

Industrial production
File:Climb.rj145.arp.750pix.jpg
Airplane of Embraer
Main industries	Automobile industry, petrochemicals, cement and construction, aircraft, textiles, food and beverages, mining, consumer durables, tourism
Industrial growth rate	6.1% (2004)
Labor force	15% of total labor force
GDP of sector	38.6% of total GDP

Main article: Industry in Brazil

Brazil has the third most advanced industrial sector in the Americas. Accounting for one-third of GDP, Brazil's diverse industries range from automobiles, steel and petrochemicals to computers, aircraft, and consumer durables. With increased economic stability provided by the Plano Real, Brazilian and multinational businesses have invested heavily in new equipment and technology, a large proportion of which has been purchased from U.S. firms.

Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the banking sector accounted for as much as 16% of the GDP. Although undergoing a major overhaul, Brazil's financial services industry provides local businesses with a wide range of products and is attracting numerous new entrants, including U.S. financial firms. The São Paulo and Rio de Janeiro stock exchanges are undergoing a consolidation and the reinsurance sector is about to be privatized.

As of 31 December 2005, there were an estimated 3,304,000 broadband lines in Brazil. Over 95% of the broadband lines were via DSL and the rest via cable modems.

Proven mineral resources are extensive. Large iron and manganese reserves are important sources of industrial raw materials and export earnings. Deposits of nickel, tin, chromite, bauxite, beryllium, copper, lead, tungsten, zinc, gold, and other minerals are exploited. High-quality cooking-grade coal required in the steel industry is in short supply.

Energy

Main article: Energy policy of Brazil

The Brazilian government has undertaken an ambitious program to reduce dependence on imported oil. Imports previously accounted for more than 70% of the country's oil needs but Brazil became energy independent in 2006. Brazil is one of the world's leading producers of hydroelectric power, with a current capacity of about 58,000 megawatts. Existing hydroelectric power provides 92% of the nation's electricity. Two large hydroelectric projects, the 12,600 megawatt Itaipu Dam on the Paraná River (the world's largest dam) and the Tucurui Dam in Pará in northern Brazil, are in operation. Brazil's first commercial nuclear reactor, Angra I, located near Rio de Janeiro, has been in operation for more than 10 years. Angra II has been completed in 2002. An Angra III is almost completed, planned inauguration is 2008. The three reactors would have combined capacity of 5,000 megawatts when completed.

Economic status

Statistical Table
File:Congresso1.jpg
National Congress, in Brasília
Inflation (IPCA)
2001	7.67%
2002	12.53%
2003	9.30%
2004	7.60%
2005	5.69%
2006	3.14%
Source:
Gross Fixed Capital Formation (% of GDP)
2001	19.47%
2002	18.32%
2003	17.78%
2004	19.58%
2005	19.93%
Source:
Average Exchange Rate (BRL for 1 USD)
2001	2.349
2002	2.920
2003	3.077
2004	2.925
2005	2.434
2006	2.176
Source:

Sustainable growth

After having been discovered in 1500, it was only in 1808 that Brazil obtained a permit from the Portuguese colonial government to set up its first factories and manufacturers. It was a long road to reach the position of 10th largest economy in the world. If at the beginning the export list was basically raw and primitive goods, such as sugar, rubber and gold, today 74% of exports consists of manufactured and semi-manufactured products.

In the last decade, domestic production increased by 32.3% and agribusiness (agriculture and cattle-raising), which grew by 47% or 3.6% per year, was the most dynamic sector – even after having weathered international crises that demanded constant adjustments to the Brazilian economy.

Control and reform

Among measures recently adopted in order to balance the economy, Brazil carried out reforms to its Social security (state and retirement pensions) and Tax systems. These changes brought with them a noteworthy addition: a Law of Fiscal Responsibility which controls public expenditure by the Executive Branches at federal, state and municipal levels. At the same time, investments were made towards administration efficiency and policies were created to encourage exports, industry and trade, thus creating “windows of opportunity” for local and international investors and producers.

With these alterations in place, Brazil has reduced its vulnerability: it imports 9% of the oil it consumes; it has halved its domestic debt through exchange rate-linked certificates and has seen exports grow, on average, by 15% a year. The exchange rate does not put pressure on the industrial sector or inflation – at 4% a year -, and does away with the possibility of a liquidity crisis. As a result, the country, after 12 years, has achieved a positive balance in the accounts which measure exports/imports, plus interest payments, services and overseas remmittances.

Consistent policies

Support for the productive sector has been simplified at all levels; active and independent, Congress and the Judiciary Branch carry out the evaluation of rules and regulations. Among the main measures taken to stimulate the economy are the reduction of up to 30% on Manufactured Products Tax (IPI), and the investment of R$ 2 billion on road cargo transportation fleets, thus improving distribution logistics. Further resources guarantee the propagation of business and information telecenters.

The Policy for Industry, Technology and Foreign Trade, at the forefront of this sector, for its part, invests R$ 14.5 billion in specific sectors, following the example of the software and semiconductor, pharmaceutical and medicine product, and capital goods sectors.

The above table indicates that in 2005, for example, the bottom 50% of the population earned only 14,07% of the total income while the richest 10% of the population earned 45.31% of the total national income. Inequality is a historic problem for Brazil, but has improved in recent years.

See also

• Economic history of Brazil
• History
• Agriculture
• Industry
• Geography
• Politics
• Tourism
• Communications
• Transportation
• Foreign relations
• Economy of South America

Lists

• List of Brazilian companies

External links

• Central Intelligence Agency's Factbook on Brazil
• Sao Paulo Stock Exchange official website
• Brazil's Central Bank official website
• Think London in Brazil website
• UK House of Commons' Committee on Trade and Industry report, "Memorandum submitted by the Corporation of London"
• UK House of Commons' Committee on Trade and Industry report, "Trade with Brazil and Mercosur"
• European Commission Brazil Country Strategy Paper 2007-2013
• World Bank Public Policy Journal, "The Informality Trap: Tax Evasion, Finance, and Productivity in Brazil"
• Brazilian Public Debt
• Travel Guide

Further reading

Baer, Werner. The Brazilian Economy: Growth and Development. 5th. Westport, CT: Praeger Publishers, 2001

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