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Economy of Brazil
Sao Paulo Stock Exchange.jpg
São Paulo Stock Exchange
Currency Brazilian real (BRL, R$)
Fiscal year Calendar year
Trade organisations Unasul, WTO, Mercosul, G-20 and others
Statistics
GDP $1.612 trillion (2008) (8th)
GDP growth -0.2% (2009) [1]
GDP per capita $8,295 (2008) (63rd)
GDP by sector agriculture: 5.5% industry: 28.7% services: 65,8% (2007)[2]
Inflation (CPI) 0.37% (December 2009) and 4.31% (2009)[3]
Population
below poverty line
15.5% (2009)[4]
Gini index 49.3 (June 2009)[5]
Labour force 95.21 million (2009 est.)
Labour force
by occupation
agriculture: 20%, industry: 14% and services: 66% (2003 est.)
Unemployment 7.4% (November 2009)[6]
Main industries airplanes, steel; iron ore, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizers; consumer products, including footwear, toys, and electronics; food processing; transportation equipment, including automobiles, rail cars and locomotives, ships, and aircraft; electronics; telecommunications equipment, commercial space launch vehicles, satellites, real estate, brewing, tourism
External
Exports $158.9 billion (2009 est.)[7]
Export goods transport equipment, iron ore, soybeans, footwear, coffee, autos, automotive parts, machinery
Main export partners United States 14.0%, Argentina 8.9%, China 8.3%, Netherlands 5.3%, Germany 4.5%, Japan 3.1% (2008)
Imports $136 billion (2009 est.)[7]
Import goods machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics
Main import partners United States 14.9%, China 11.6%, Argentina 7.7%, Germany 6.9%, Japan 3.9%, Nigeria 3.9%, South Korea 3.1% (2008)
Gross external debt $216.1 billion (31 December 2009 est.)
Public finances
Public debt $103.2 billion; 6.4% of GDP (2008 est.)
Credit rating BBB- [8]
Foreign reserves $235.7 billion (November 2009)[9]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

Brazil has moderately free markets and an inward-oriented economy. Measured nominally, its gross domestic product surpasses $1.6 trillion dollars, the eighth in the world and the second in the Americas in the World Bank ranking; measured by purchasing power parity, $1.9 trillion, making it the ninth largest economy in the world and the second largest in the Americas, after the United States.[10] In Reais (Brazilian currency), its GDP is estimated at R$ 2.9 trillion reais in 2008. The Brazilian economy has been predicted to become one of the five largest economies in the world in the decades ahead to come, the GDP per capita following and growing. [11]

Brazil is a member of diverse economic organizations, such as Mercosul, SACN, G8+5, G20 and the Cairns Group. Its trade partners number in the hundreds, with 60% of exports mostly of manufactured or semimanufactured goods.[12] Brazil's main trade partners in 2008 were: Mercosul and Latin America (25.9% of trade), EU (23.4%), Asia (18.9%), the United States (14.0%), and others (17.8%).[13]

According to the World Economic Forum, Brazil was the top country in upward evolution of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia for the first time, and partially closing the competitiveness gap with India and China among the BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well as measures taken to liberalize and open the economy, have significantly boosted the country’s competitiveness fundamentals, providing a better environment for private-sector development.[14]

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 satellite launching center and was the only country in the Southern Hemisphere to integrate the team responsible for the construction of the International Space Station (ISS).[15] It is also a pioneer in many fields, including ethanol production.

Brazil, together with Mexico, has been at the forefront of the Latin American multinationals phenomenon by which, thanks to superior technology and organization, local companies have successfully turned global. These multinationals have made this transition notably by investing massively abroad, in the region and beyond, and thus realizing an increasing portion of their revenues internationally.[14]

Brazil is also a pioneer in the fields of deep water oil research from where 73% of its reserves are extracted.[12] According to government statistics, Brazil was the first capitalist country to bring together the ten largest car assembly companies inside its national territory.[12]

Contents

History

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 three main large-scale economic production cycles - sugar, gold and, from the early 19th century on, coffee. The economy of Brazil was heavily dependent on retarded slave labourAfrican enslaved labour until the late 19th century (about 3 million imported African enslaved individuals 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 America, the United States, Brazil, Canada and Argentina (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 tens of millions of 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 hundred petrochemicals. Furthermore, Brazil has at least 161,500 kilometers of paved roads and more than 63 megawatts of installed electric power capacity.

Its real per capita GDP has surpassed US$10,500 in 2008, due to the strong and continued appreciation of the real for the first time this decade. Its industrial sector accounts for three fifths of the Latin American economy's industrial production.[12] The country’s scientific and technological development is argued to be attractive to foreign direct investment, which has averaged US$ 30 billion per year the last years, compared to only US$ 2 billion/year last decade,[12] thus showing a remarkable growth. The agricultural sector, locally called the agronegócio (agrobusiness) , 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.[12] The agricultural sector and the mining sector also supported trade surpluses which allowed for massive currency gains (rebound) and external debt paydown.

Components of the economy

The service sector is the largest component of GDP at 66.8%, followed by the industrial sector at 29.7% (2007 est.). Agriculture represents 3.5% of GDP (2008 est.). Brazilian labor force is estimated at 100.77 million of which 10% is occupied in agriculture, 19% in the industry sector and 71% in the service sector.

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Agriculture and food production

Agriculture production
Agriculture in Brazil.PNG
Combine harvester on a plantation
Main products Coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, citrus, beef
Agriculture growth rate 9.2% (2008)
Labor force 15% of total labor force
GDP of sector 3.5% of total GDP

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.[16]

In the space of fifty five years (1950 to 2005), the population of Brazil grew from 51 million to approximately 187 million inhabitants,[17] 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.[16] 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.[16]

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.[16]

Brazilian exports in 2006.

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.[16]

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,[18] responsible for exports surpassing the mark of US$ 1 billion/year.[16]

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.[16]

Industry

Industrial production
Air.france.erj145.750pix.jpg
Embraer RJ 145 jet manufactured by Embraer
Main industries Automobile industry, petrochemicals, machinery, electronics, cement and construction, aircraft, textiles, food and beverages, mining, consumer durables, tourism
Industrial growth rate 8.8% (2008 est.)
Labor force 21% of total labor force
GDP of sector 29.7% of total GDP

Brazil has the second biggest industrial sector in the Americas. Accounting for 28.5% 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 relatively 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 previously monopolistic reinsurance sector is being opened up to third party companies.[19]

As of 31 December 2007, there were an estimated 21,304,000 broadband lines in Brazil. Over 75% of the broadband lines were via DSL and 10% 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, uranium, 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.

Largest companies

In 2008, 34 Brazilian companies were listed in the Forbes Global 2000 list - an annual ranking of the top 2000 public companies in the world by Forbes magazine.[20] The 10 leading companies are:

World Rank Company Industry Revenue
(billion $)
Profits
(billion $)
Assets
(billion $)
Market Value
(billion $)
Headquarters
8 Petrobras Oil & Gas Operations 208.3 15.04 149.98 295.60 Rio de Janeiro
49 Vale Mining 43.23 14.26 84.70 171.39 Rio de Janeiro
81 Banco Bradesco Banking 36.12 4.11 192.65 59.80 Osasco, Greater São Paulo
101 Banco do Brasil Banking 28.61 2.60 202.00 41.54 Brasília
103 Banco Itaú Banking 28.97 2.05 167.06 28.22 São Paulo
203 Unibanco Banking 15.29 1.94 84.04 27.37 São Paulo
322 Eletrobrás Utilities 9.20 0.54 56.62 18.08 Rio de Janeiro
514 Usiminas Materials 5.82 1.18 8.63 19.14 Belo Horizonte
519 Oi Telecommunications Services 7.90 0.61 12.36 11.69 Rio de Janeiro
606 Gerdau Steel 11.03 0.63 12.39 8.13 Porto Alegre

Energy

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 108,000 megawatts. Existing hydroelectric power provides 80% of the nation's electricity. Two large hydroelectric projects, the 15,900 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 was completed in 2002 and is in operation too. An Angra III has its planned inauguration scheduled for 2014. The three reactors would have combined capacity of 9,000 megawatts when completed. The government also plans to build 17 more nuclear plants by the year 2020.

Economic status

Statistical Table
Inflation (IPCA)
2002 12.53%
2003 9.30%
2004 7.60%
2005 5.69%
2006 3.14%
2007 4.46%
2008 5.91%
Source:[21]
Gross Fixed Capital Formation (% of GDP)
2001 19.47%
2002 18.32%
2003 17.78%
2004 19.58%
2005 19.99%
Source:[22]
Average GDP growth rate 1950-2008
1950-59 7.1%
1960-69 6.1%
1970-79 8.9%
1980-89 3.0%
1990-99 1.7%
2000-08 3.7%
Source:[23]
"In Brazil a labor-union leader has presided over an amazing period of social and economic progress. It is also one of the few countries that have successfully managed to reduce economic inequality at a time when everywhere else inequities are deepening. Successive Brazilian governments, of rival political parties, have succeeded in improving education, health and the living standards of millions of impoverished citizens who have now joined a growing middle class. Brazil has an energy policy that has spawned the world's most vibrant biofuels industry. In 1995, 15 percent of Brazilian school-age children did not go to school. In 2005, this fell to 3 percent, and today Brazil has practically achieved universal basic education."
Moisés Naím, Newsweek, June 2009 [24]

Sustainable growth

After being discovered by Portugal 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. In the 21st century, Brazil reached the status of 8th 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 84% of exports consists of manufactured and semi-manufactured products.

The period of great economic transformation and growth occurred between 1875 and 1975.

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.[25]

Brazil's transparency ranking status in the International World is 75th according to Transparency International.[26] It is equal with Colombia, Peru and Suriname.

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 doesn't import the oil it consumes; it has halved its domestic debt through exchange rate-linked certificates and has seen exports grow, on average, by 20% 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 payment. Thus, respected economists say that the country won't be deeply affected by the current world economic crisis.[27][28]

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 $ 8 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 $ 19.5 billion in specific sectors, following the example of the software and semiconductor, pharmaceutical and medicine product, and capital goods sectors.[29]

Income in Brazil

The median income of the ministers of Supreme Federal Court is more than R$ 300,000.[30]
The city of Araporã, Minas Gerais, has the largest median income of Brazil, R$ 260,000.[31]
São Paulo has the largest GDP of the country.

The minimum wage set for the year of 2010 is R$6,630.00 or R$510 per month plus an additional 13th salary (R$ 255,00 in June and R$ 255,00 in December).[32] The GDP per capita in 2008 was $10,465.[33]

Career[34] Overall Median Start Median Top Median
Judge Law 170,000 150,500 310,500
Prosecutor Law 150,000 140,000 270,000
General director Administration 90,000 60,000 1,450,000
Physician Medicine 85,000 40,000 1,550,000
Judicial analyst Law 80,000 70,000 90,000
Police chief Law 60,000 50,000 85,000
Electronic engineer Engineering 51,000 33,600 360,000
Civil engineer Engineering 50,400 22,800 360,000
Other engineers Engineering 45,000 24,000 130,000
Economic researcher Economy 44,000 24,000 180,000
Mechanical engineer Engineering 42,600 26,200 105,000
Technical of taxation Bachelor's degree 41,520 26,400 240,000
Professors Higher education 40,440 20,000 300,000
Agronomic Agronomy 40,000 27,600 96,000
Chemical engineer Engineering 40,000 31,200 420,000
System analyst Computer science 38,400 30,000 180,000
Dentist Dentistry 37,800 29,400 720,000
Architect Architecture 37,320 13,800 600,000
Lawyer Law 36,120 20,040 3,000,000
Counter Accountancy 35,880 17,400 216,000
Administrator Administration 35,400 25,080 1,800,000
Journalist Journalism 32,880 18,000 2,400,000

See also

References

  1. ^ In 2009, GDP changed -0.2% and was R$ 3,143 billion - March 11 2010 - IBGE
  2. ^ IBGE :: Instituto Brasileiro de Geografia e Estatística
  3. ^ IPCA of December was 0.37% - IBGE
  4. ^ Linha de Pobreza
  5. ^ "Desigualdade e pobreza continuaram caindo no Brasil mesmo com crise, revela Ipea — Agência Brasil - EBC". Agenciabrasil.gov.br. http://www.agenciabrasil.gov.br/noticias/2009/08/03/materia.2009-08-03.3509162052/view. Retrieved 2009-10-29. 
  6. ^ IBGE Employment Survey/ November 2009
  7. ^ a b Folha (2009). "Superávit cai 38% e balança comercial fecha 2008 com pior resultado desde 2002". Folha Online. http://www1.folha.uol.com.br/folha/dinheiro/ult91u485398.shtml. Retrieved January 2, 2009. 
  8. ^ Bloomberg: Brazilian Debt Raised to Investment Grade by S&P
  9. ^ Central Bank of Brazil - Portuguese
  10. ^ The World Factbook CIA
  11. ^ http://www.chicagobooth.edu/alumni/clubs/pakistan/docs/next11dream-march%20'07-goldmansachs.pdf
  12. ^ a b c d e f About Brazil Brazilian Government
  13. ^ MDIC - Brazil Balance of Trade 2008
  14. ^ a b Global Competitiveness Report 2009-2010
  15. ^ Countries Participating in the ISS ISS EarthKam
  16. ^ a b c d e f g Agriculture Brazilian Government
  17. ^ Popclock IBGE
  18. ^ Indicators Brazilian Government
  19. ^ "Government breaks reinsurance monopoly, discards privatization (in Portuguese)". http://www1.folha.uol.com.br/folha/dinheiro/ult91u113719.shtml. Retrieved 2008-04-29. 
  20. ^ "Forbes Global 2000: Brazil". http://www.forbes.com/lists/2008/18/biz_2000global08_The-Global-2000-Brazil_10Rank.html. Retrieved May 2008. 
  21. ^ Inflation Ipea
  22. ^ Gross Fixed Capital Formation iPib
  23. ^ Average Exchange Rate Ipea
  24. ^ The Havana Obsession: Why All Eyes are on a Bankrupt Island by Moisés Naím, Newsweek, June 22, 2009
  25. ^ Sustainable growth Brazilian Government
  26. ^ Transparency by country 2009
  27. ^ Brazil and economic crisis
  28. ^ Control and reform Brazilian Government
  29. ^ Consistent policies Brazilian Government
  30. ^ Median income - Brazilian Supreme Court
  31. ^ GDP per capita - Brazilian cities in 2006
  32. ^ 2010 Minimum Wage - Brazil
  33. ^ International Monetary Fund
  34. ^ Median Incomes in Brazil by Career in 2007 - FGV

External links

Further reading

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

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