Brazil's GDP (PPP and Nominal) is the highest of Latin America with large and developed agricultural, mining, manufacturing, and service sectors, as well as a large labor pool. The country has been expanding its presence in international financial and commodities markets, and is regarded as one of the groups of four emerging economies called BRIC. Major export products include aircraft, coffee, automobiles, soybean, iron ore, orange juice, steel, ethanol, textiles, footwear, corned beef and electrical equipment. According to the International Monetary Fund and the World Bank, Brazil has the ninth largest economy in the world by purchasing power parity (PPP) and tenth largest at market exchange rates. Brazil has a diversified middle income economy with wide variations in development levels. Most large industry is agglomerated in the Southern and South East states. The Northeast is the poorest region of Brazil, but it has attracted new investments in infrastructure for the tourism sector and intensive agricultural schemes.Brazil had pegged its currency, the real, to the U.S. dollar in 1994. However, after the East Asian financial crisis, the Russian default in 1998 and the series of adverse financial events that followed it, the Brazilian central bank has temporarily changed its monetary policy to a managed-float scheme while undergoing a currency crisis, until definitively changing the exchange regime to free-float in January 1999. Brazil received an IMF rescue package in mid-2002 in the amount of USD 30.4 billion a record sum at that time. The IMF loan was paid off early by Brazil's central bank in 2005 (the due date was scheduled for 2006).
Brazil has a diverse and sophisticated service industry as well. During the early 1990s, the banking sector amounted to as much as 16% of GDP, and has attracted foreign financial institutions and firms by issuing and trading Brazilian Depositary Receipts (BDRs). One of the issues the Brazilian central bank is currently dealing with is the excess of speculative short-term capital inflows to the country in the past few months, which might explain in part the recent downfall of the U.S. dollar against the real in the period. Nonetheless, foreign direct investment (FDI), related to long-term, less speculative investment in production, is estimated to be USD 193.8bn for 2007. Inflation monitoring and control currently plays a major role in Brazil's Central Bank activity in setting out short-term interest rates as a monetary policy measure. The IPCA index, measured and calculated by the IBGE on a monthly basis, is the most commonly used index for inflation, although other indices such as the IPC-Fipe and IGP-M (FGV) are also widely used. According to the 2006 census, White Brazilians make up 49.7% of Brazil's population, or 93.096 million people.
Thanks to the review of the politic economy inserted in the country in 1993, Brazil construed the base to a strong economic development. It’s true that are some addictions and mistakes to these days, that’s why some adjustments are necessary so the right path can be followed. High expenses with The Public Force, high bureaucracy in his public service, and corruption are problems that the government should target it immediately.
The major consequence with high expenses with the Public Power is the high levels of taxation paid by the Brazilians. If we want to make a growth in the Brazilian economy, the government will have to adopt the reduction in the public spend. Otherwise the country will be inferior compared to other emerged markets. After having controlled the inflation, minimized the interest rates and resolved the problems of the extern debts, the priority now is to improve the business environment.
The International Monetary Fund (FMI) requested Brazil to minimize the autocracy and taxes paid by the companies for each employee, so that is a way to achieve a growth. It was also advised to the consolidation of the macroeconomics stability with the political economy in the institutional level, the rise of the efficiency of the public area and improvements of government’s bills.
Still referring with to the bureaucracy, the business environment in Brazil is in the 25th between the 31st of economies of Latin America and Caribbean Islands analyzed by the World Bank. Not counting the Caribbean Nations, making business in Brazil is not just worse than Ecuador, Bolivia and Venezuela. In first place it’s Chile, followed by Uruguay and Mexico. In the world rank, that lists 175 economies, Brazil stays in 120th place. Brazil was in 2005 the second country most expensive to live in South America, only losing for Chile. Paraguay and Bolivia were considered the cheapest ones.
In countries with a lot of differences like Brazil, the prices of products and the high concentration of income limits the access of the population to the richness. Brazil is the 6th position in family’s spending, besides, Brazil has the most develop economy in the region in terms of South America.
The information presented above show that the Tributary Reform and the Work Reform are crucial priorities in order to a bigger development.
*Ongoing disclaimer- Many of our posts are from Brazilians- please ignore grammatical errors and focus instead on content. We will make an attempt at editing posts when time permits.
- A. Jonathan Buhalis
