Economy of Brazil

Brazil is the 10th worldwide economy with a GDP of 1.068 billion dollars in 2006 (Total GDP 2006, World Bank). The Brazilian economy is to be brought closer to sound history: indeed, the first forms of industry (exploitation of wood, canes with sugar) durably marked the economic landscape of the country.

The austerity measures followed by the minister Antonio Palocci, but disapproved by the electoral base of the president and part of employers, make it possible the Brazilian economy to post a controlled inflation and historical trade surpluses. However, in August 2005, the Nobel Prize of the economy Joseph Stiglitz, of passage to Sao Paulo, was afflicted that the president Lula da Silva did not choose “ a more aggressive policy, with a change of the economic structure to make the country less depend on the external capital ”, because according to him an economic piloting, making very to obtain a weak inflation and a raised budget surplus, guarantees neither the growth nor the reduction of the social inequalities. Even prohibitory interest rates raised such as the practice Brazil - 19,75% in August 2005 -, should be only the means - although risky - of a policy of growth and not an end in itself. These high rates erode the productivity of the country which knows only one growth of 3%, one of weakest of Latin America.

History of the economy

Beginnings of colonization

Colonization by the coasts involved the discovery of several new gasolines of Bois, of which in particular the Pau brasil (firewood), from where the country draws its name. Its exploitation was the beginning of a Déforestation which perdure still with currently exploited species even more.

Most of the workmen of the plantations then makes up of Esclave S.

The 18th century

The Brazilian economy including one great part is based on the culture and the trade of the Canne to sugar is disturbed at this time by the introduction in Europe of the sugar Betterave. In parallel, layers of Gold and money are discovered in the interior of the country. One attends a Gold rush then which installs new cities in the middle of the Forêt Amazonia.

At the same time, of the invaluable stones starts to be extracted the mines in the Minas Gerais, area which draws its name from this industry.

19th and the 20th century

New agro-industrial productions come to be added: the Coffee and the rubber. This last will however rather quickly know a reconversion towards the production of natural latex because of the development of the production of rubber starting from the Pétrole in first half of the 20th century.

In 1888, with the Abolition of the slave system (largely due to purely economic reasons: it became more expensive to maintain the slaves than to pay wages with recently immigrant workmen), the industrial tools start to be modernized slowly.

During the First World War and in the years which follow it, the industrialization of the country is consolidated in an important way, to reach a level of industrial operation modern.

During the Second world war, the first iron and steel production unit is built (1940, state of Rio de Janeiro), providing the foundations of a saving in mass production (Automobile, Pétrochimie, Acier, machine tools, Aéronautique…). In parallel, the installation of infrastructures of Transport and Télécommunications makes it possible to support the development of the country, which knows Rate of economic growth records until in 1974 (7,4% on average).

The massive surge of capital in the Years 1970, coming from the the United States, of the Europe and the Japan was used to subsidize government enterprises and to build more infrastructures in the poorest areas, to encourage their economic takeoff. The immediate result was sensitive: GDP knew a growth of more than 8% per annum over the decade, in spite of the double Oil crisis. However, the Années 1980 saw a reversal of situation and Brazil was forced to restrict its Public expenditure. This crisis situation fed an acceleration of the Inflation and a notable increase in the weight of the debt, before measures of Economic austerity are not taken to stabilize the Monnaie.

On the end of this episode, in 1987, the government negotiated an agreement with its creditors to re-spread the payment of the debt, after having suspended its payment. The concluded agreement did not have the expected results but was however sufficient so that the total economic production ensures a trade surplus making it possible to cover the Intérêt S of the debt.

In the Years 1990, Brazil followed a strict fiscal policy but the by-effects of the financial crisis of 1998 in Asia of south-east ended up forcing it to make take down the currency, the réal, of the American dollar.

Current structure of the economy

Traditional sectors

Brazil withdrew itself from the traditional sectors and adopted the economic policy of Colombia.

Industry

Brazil is the industrial leader in Latin America. Industry employs 41% of the credits, the field of aeronautics is particularly dynamic in Brazil.

Energy

( See the detailed article: Energy in Brazil )

The demand for primary energy in Brazil rose in 2001 to 238 million Mtoe, in increase of 30% since 1990. The national production rose to 206 million Mtoe, that is to say a rate of self-sufficiency close to 90%. The stake of the development of the national production of energy is very important to ensure the growth of the GDP as well as to contribute to the balance of the trade balance.

In Brazil, the supply of electrical energy rests primarily on the Hydroélectricité, which provides 86% of the total production of electricity. The country is equipped with the hydroelectric potential most important of the world, estimated at 255 million kilowatts. It lays out with the hydroelectric factory of Itaipu, on the river Paraná of the largest installation of the kind in the world.

The country develops also a complete die in the field of the nuclear power, which currently provides 4,3% of the energy produced in the country. It has for that of important reserves Uranium and developed a technique Uranium enrichment which would be very competitive.

It also developed its production of Pétrole, in particular thanks to drillings in open sea. Its production which approaches 1,7 million barrels per day makes it possible him to reach short-term self-sufficiency.

The national company of oil exploitation is Petrobras, however this one does not lay out any more, since 1995, of the monopoly of production.

Brazil also strongly developed the die of the ethanol, Biocarburant of which it is, with 154 million hectolitres per annum, the first world producer. This ethanol is produced starting from the cane with sugar, which allows thanks to high outputs low production costs, about 0,17 euro/l. A development plan of ethanol lays down a progression of the production of 55% from here 2010, to reach 240 million hectolitres in this term. Vast a plane pro-alcohol was set up to decrease pollution with sulfur in particular and to improve energy autonomy. That was not without consequence on the Déforestation. In this program, the Canne with sugar was used as raw material. But the production was never profitable, and the use of ethanol was gradually reduced - without being never completely abandoned with the profit of its integration with the gasoline. Among criticisms against this program, in addition to the cost, the demand for arable lands appears which it represents, at the expense of the forests and the food crops. The fall of the oil price in the years 1980, the expansion of the diesel park, and finally the discovery of important oil resources in Brazilian water were as many adverse conditions for this program, which knows a recent renewed interest however, because of blaze of the international courses of oil. The energy assessment of Brazilian ethanol is rather good because the “refineries” are autonomous in energy, the bagasse of cane with sugar providing sufficient fuel for their operation.

The marketing of vehicles Polycarburant S (or flex fuel , VCM) knew a spectacular flight with the rise of the course of oil, to exceed 5 000 % in 1999. It is estimated that this rate will exceed 90 % in 2008. One can note that Sweden it also developed this technique, although the biocarburants are essentially imported. Indeed the cane with sugar does not push in Europe. The two solutions which remain are the production of ethanol starting from sugar beet or the importation, two processes much more expensive in energy. That involves a Vicious circle which removes with biocarburant its qualities of renewable energy.

Growth industries

Brazil has as an ambition to obtain a space technology national. It has a launching base with Alcântara, in the North-East of the country. Since 1997, Brazil knew several failures, including one having caused the death of 21 technicians in August 2003.

The space program was maintained and supported by the various presidents over this period.

October 23rd, 2004, a first rocket is launched successfully, and remained four minutes in microphone-gravity.

The aeronautical is also a very important sector, with Embraer, 4th world manufacturer of Avion S.

The Brésil has also the competences advanced in the medical field (manufacture of Médicament S credits), the cloning of animals (birth of the first cow clonée in 2001).

Finally Brazil affirms developed in its nuclear factory of Resende (State of Rio de Janeiro) a process of uranium enrichment 25 times less expensive than that used with the the United States.

Finances

Under the pressure of the the World Bank, Brazil gradually reduces its national debt, which passed from 57% in 2003 to 51% in 2005. Inflation is controlled since 1994. The cleansing of the budget situation led Brazil to announce in March 2005 that it would not have recourse to a new loan of the the IMF.

The Interest rate remain however high: the directing Taux of the Brazilian central bank is of 11% and the final borrowers can be subjected torates of 25%. These rate, which shows that the financial institutions fear a return of the drifts, weigh on the growth, which oscillates between 0 and 5% since the middle of the years 1990.

Inequalities

1% of the population have 50% of the grounds, the 17 million Brazilian richest make 50% of the importations.10% of richest gain on average 80 times more than 10% of poorest. The inequalities between Blacks and White are the worse qu´aux United States.

Key figures

Active population : 82,59 million (estimate 2003).
Active population by sector : Services 53%, Agriculture 23%, Industry 24%.
Many recorded companies : 4.679.825 (2001).
GDP: 1.068 billion $US (2006).
PIB/hab. : 3331 $US (2004).
Returned/hab.: 8500,41 $US (2006).
Budget surplus: +4,5% of the GDP (2004).
Growth: +5,2% (2004).
Inflation: 9,3% (2003).
Unemployment: 12,3% (estimate 2003).
external national Debt: 51,8% of the GDP (2004), has dropped some for the first time for 5 years.
Exports: 96,5 billion $US (2005).
Imports: 68,4 billion $US (2005).
Balance: surplus of US$ 33,6 billion $US (2004).

IDH (index of human development): 73e world. IDH ranging between 0,78 and 0,88 (1995).

directing Rate of the Central Bank: 16,25% (September 2004).

Telephone lines: 53,8 million (Anatel 2004).

Cellphones: 57 million (Anatel 2004).

Radios: 71 million (in 1997).

Television stations: 36,5 million (1997).

Subscription of television: 13,1 million (2004) (cable and MMDS).

Users of Internet: 14,3 million (2002).

Many suppliers of access Internet: 50 (2000).

Many personal computers: 19,3 million (2004).

Roads: 1.724.929 million km (including 94.871 tarred km) (2000).

Railways: 29.706 km (including 1.620 electrified km) (2004).

inland Waterways: 50.000 km.

Many airports: 3.803 (including 677 with tarred tracks) (2003).

Number of Heliport S: 417 (2003).

POPULATION: 184.184.264 of hab. (IBGE: is. 7/1/2005) GDP: US $ 604,876 MDS, are R$ 1.766.621.034 Source: (BC: 2004) More infos GROWTH RATE OF THE GDP: 4,9% (BC: 2004) INCOME PER HEAD: R$ 8.694, is US$ 2.967,23 (IBGE: 2003) Foreign trade (Source: Ministério C Desenvolvimento, Indústria E Comércio. 2005) Exports: US$ 118,308 MDS (MDIC: 2005) More information Imports: US$ 75,551 MDS (MDIC: 2005). More information Balance Balance of payments: US$ 44,757 MDS (MDIC: 2005). More information
SMIC: R$ 300,00 More information on wages and work. Inflation: 5,52% (12 dern. month); 0,41% (fév 2006). More information Interest rate of Central Bank: 14,75% (up to date it: 7/28/06) Cours du US dollar: R$ 2,19% (up to date it: 7/28/06)

See too

related Articles

List of Brazilian companies

external Bond * Brazil Atlas and Figures

Brazilian Economy Assets and Challenges
Brazil: a remarkable course - Finances & Development June 2005
topo the very complete on the economy of country, up to date until approximately 1995

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