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Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, as well as a large labor pool, Brazil's GDP (PPP) outweighs that of any other Latin American country, being the core economy of Mercosur. The country has been expanding its presence in world markets. Major export products include aircraft, coffee, vehicles, soybean, iron ore, orange juice, steel, textiles, footwear and electrical equipment. According to the International Monetary Fund and the World Bank, Brazil has the ninth largest economy in the world at purchasing power parity. Brazil has a diversified middle income economy with wide variations in development levels. Most large industry is agglomerated in the South and South-East. The North-East is the poorest region of Brazil, but it is beginning to attract new investment. Brazil has the most advanced industrial sector in Latin America. Amounting to one-third of GDP, Brazil's diverse industries range from automobiles, steel and petrochemicals to computers, aircraft, and consumer durables. With the 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 North American enterprises. Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the banking sector amounted to as much as 16% of GDP. Although undergoing a major overhaul, Brazilian 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. Brazilian cities vary significantly in the ease of doing business, according to the new Doing Business in Brazil report released by The World Bank Group. Brazilian cities perform better when it comes to the cost of registering property. But despite identical regulations across Brazil, there is a wide variation in the time it takes to transfer property |
After decades of inflation and several attempts to control it, Brazil embarked on a successful economic stabilization program, the Real Plan (named after the new currency it's introduced, the Real) in July 1994. The inflation rates, which had reached an annual level of nearly 5,000% at the end of 1993, fell sharply, reaching a low of 2.5% in 1998. The passing of the Fiscal Responsibility Law in 2000 has improved the fiscal discipline of the local and federal governments. During the Fernando Henrique Cardoso administration (1995-2002), the government led efforts to replace a state-dominated economy with a market-oriented one. The Congress has approved several amendments opening the economy to greater private sector participation, and fostering the involvement of foreign investors. By the end of 2003, Brazil's privatization program, which included the sale of steel, electricity and telecommunications firms, had generated proceeds of more than $90 billion. In January 1999, the Brazilian Central Bank announced that the Real would no longer be pegged to the U.S. dollar, which entailed a major devaluation of the Brazilian currency. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998. Brazil's debt to GDP ratio of 48% for 1999 beat the IMF target and helped reassure investors that Brazil will maintain tight fiscal and monetary policy even with a floating currency and the economy grew 4.4% in 2000. In 2001, growing concerns that the presidential candidate considered most likely to win, leftist Luis Inácio Lula da Silva, would default on the debt, triggered a confidence crisis that caused the economy to decelerate. However once elected Lula resumed the economic policies of his predecessor (thus in a way forswearing his socialist past). In 2003, President Lula took an austere approach to the economy by controlling inflation and seeking current account surpluses in order to meet Brazil's debt obligations. With an economic program that combined restrictive monetary policy and an increase in taxes, Lula surprised most economic actors, increased international confidence, and improved Brazilian debt ratings. After a GDP increase of 0.5% in 2003, Brazil did not show very robust growth in 2004, decreasing to the pace of 2.3% (2005); international economic growth and, consequentially, expansion of exports, no doubt contributed to this performance. In January 10, 2006, the IMF showed satisfaction with Brazil's economic policies. Brazil has already paid off its debts with the International Monetary Fund and the Paris Club |
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The economy still has serious challenges to face and important reforms are still to be implemented. Serious problems involving poor infrastructure, income concentration, low quality public services, corruption, social conflicts and government bureaucracy persist and threaten to hamper economic growth, compared to other emerging countries. The internal public debt has reached the all time record and public expenses have been increased. Taxes already represent a considerable part of national income and are a serious burden to all social classes, diminishing opportunities for investment. Current economic growth is below that of comparable Latin American countries and is ridiculous if compared to that of China and India. Brazil has dropped 11 positions on the WEF Growth Competitiveness Index ranking from 2003 to 2005. |
Brazil Information: Inside
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