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Brazil '98: Introduction
Brazil '98: Participants
Brazil '98: Map of Brazil
Brazil '98: Itinerary
Brazil '98: Debates
Brazil '98: Sponsors
Brazil '98: Brazil Facts

Brazil and the world economy
The historical development of the Amazon
More facts about the Amazon

 


Brazil and the world economy

Brazil has a large and diverse economy. Within the developing world it is recognised as having the potential to become a developed industrial nation. In the 1970s economists referred to Brazil as one of the Newly Industrialised Countries (NICs). Yet despite predictions that the Brazilian economy would ‘take off’ and climb to the status of a developed industrial nation this has not happened. In fact throughout the 1980s Brazil’s economy was beset with economic problems including runaway inflation.
Brazil’s industrial development in the 20th century has relied on a series of economic plans that have restricted foreign ownership of the economy and foreign imports. These strong nationalist economic policies allowed Brazil to exploit its own resources and develop certain sectors of its economy. Brazil could not generalise this development and was always susceptible to pressure from stronger economies in the West. More recently in the 1980s, Brazil tried to establish its own computer and information technology industry through national protective policies and investments in the information technology sector. The US through economic pressure on Brazil and by taking measures to restrict its access to high technology, forced Brazil to abandon the development of its own computer industry. US computer companies like IBM now dominate the Brazilian market.
Brazil is one of the world’s largest debtor nations owing a massive $157.4 billion in foreign debt. Debt owed to Western banks is one of Brazil’s major economic difficulties. Income and potential investment is used to pay off the interest on this debt. Today the Brazilian economy is relatively stable. This has been brought about by a series of austerity measures which have cut living standards and increased prices of goods. A massive programme of privatisation is now under way as Brazil opens up its markets to the world economy. Since 1994 the Brazilian currency has been based on the Real (R$) which is tied to the value of the dollar. The exchange rate is approximately R$1.01 per US dollar.
Brazil is the largest Latin American economy. It produces 40 per cent of Latin America’s Gross Domestic Product (GDP) with a purchasing power of $785 billion, the ninth largest in the world. It has a growth rate of about four per cent. Brazil holds 50 per cent of Latin America’s top 500 companies and has the best performing stock market in Latin America. Brazil has one of the largest foreign exchange reserves in the world of $60 billion.

The structure of the economy
Agriculture accounts for approximately 13 per cent of GDP and about 35 per cent of exports and employs some 30 per cent of the work force. Mining contributes over five per cent of GDP and uses four per cent of the work force. Manufacturing contributes about 34 per cent of GDP and employs 20 per cent of the work force. National unemployment is about five per cent. The unemployment rate in Greater São Paulo, Brazil’s main industrial zone, is about 15.5 per cent or 1.342 million people. There are great regional and social disparities in wealth and poverty in Brazil. Forty two million people live below the poverty line. There is little in the form of a welfare system as we experience in Europe. The cities of the south east such as Rio de Janeiro are relatively wealthy with modern infrastructures. Yet there is a great divide here between the haves and have-nots. A large proportion of the urban populations live in extreme poverty. The northern regions are the poorest and in regions like Amazonia many still try to survive on subsistence agriculture. For the poor the recent shake up of the economy has made things worse, with unemployment and the cost of living increasing.
Exports include coffee (10 per cent); soya beans (7 per cent); iron ore (7 per cent); steel and products (9 per cent); capital goods (9 per cent); textiles and footwear (8 per cent); transport (car parts) and materials (7 per cent); fuel and lubricants (7 per cent); chemicals (6 per cent); which in 1993 accounted for about $39 billion. The main partners for these exports are EU (27.6 per cent); Latin America (21.8 per cent); US (17.4 per cent ); Japan (6.3 per cent).
Imports include mineral fuels and products (49 per cent); capital goods (15 per cent); chemicals (11 per cent); foodstuffs (11 per cent); transport products (4 per cent); which in 1993 accounted for approximately $26 billion. The main partners for imports are the US (24 per cent); EU (23 per cent); Middle East (13 per cent); Latin America (11.8 per cent) and Japan (6.5 per cent) (1993). Brazil’s current trade deficit is $1.23 billion.

Economic overview of the 1990's
The economy, with large agrarian, mining and manufacturing sectors, entered the 1990s with declining real growth, runaway inflation, an unserviceable foreign debt of $157.4 billion and a lack of policy direction. Ownership of major industrial and mining facilities is divided among private interests–including several multinationals–and the government. Most large agricultural holdings are private, with the government channelling financing to this sector. Conflicts between large landholders and landless peasants have produced intermittent violence.
The Collor Government, which assumed office in March 1990, launched a reform program that sought to modernise and reinvigorate the economy by stabilising prices, deregulating the economy and opening it up to increased foreign competition. The Government also obtained an International Monetary Fund (IMF) standby loan in January 1992 and reached agreements with commercial bankers on the repayment of interest arrears and on the reduction of debt and debt service payments.
Galloping inflation continued to undermine economic stability. Further measures to open up Brazil to the Western market economy through the privatisation of state enterprises and liberalisation of trade and investment policies have gained momentum under the present administration of President Fernando Henrique Cardoso. These measures and a budget cutting programme led to a lower inflation rate in 1995 of 12.9 per cent.