Download Brazil Overview

NS4540
Winter Term 2017
Brazilian Economy Overview
Overview I
• Brazil is the sixth largest economy in the world
• The world’s second largest emerging market
• Agricultural production and export of raw materials has
historically played a prominent role in Brazil’s economy
• However Brazil was one of the earliest industrial powers
in Latin America
• Coffee production in Brazil in the 19th century resulted in
concentration of income in hands of Sao Paulo landed Class
• They favored a more diverse investment portfolio
• Coffee profits went into transportation and other industrial and
commercial enterprises
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Overview II
• Young industries received further boost from interruption
of trade during First and Second World Wars – protection
• Early as 1947 manufacturing sector had displaced
agriculture as country’s principle sector
• However manufacturers did not comprise a significant
proportion of Brazilian exports until last quarter of 20th
century
• Although initially dominated by resource-based
products– processed foods composition of exports has
shifted reflecting technological upgrading of national
industries
• Sophisticated heavy manufacturers
• Telecommunications
• Automobiles and aircraft
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Overview III
• As with many countries, consistent economic growth and
macroeconomic stability has eluded Brazil, especially in
20th century
• However by the first decade of the 21st century Brazilian
economy was growing at a record pace of 4.5% per year
• This economic growth has been accompanied by equally
remarkable improvements in living standards and
significant achievements in socio-economic areas
• Poverty reduction
• Improved literacy
• Increased life expectancy
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Overview IV
• These advances in area of human welfare stem from
foundation in basic health and education that was
constructed in period on inward growth in mid 20th
century -- especially
• Plan of President Vargas (1930-45) for industrialization, and
• The intensive social welfare programs – Bolsa Familia initiative
during 1990s and early 2000s
• Shift in Brazilian economic paradigm from inward
looking, state-led model of growth – characteristic of
region in mid-20the century
• Prompted by chronic and hyperinflation from 1980s into
the early 1990s
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Overview V
• Hyper inflation generated political capital needed to push
through market-oriented reforms
• Initiated under President Collor de Mello (1990-92) and
• Strengthened under President Cardoso (1995-2002)
• Dissatisfaction with fiscal austerity and income and
social inequality grew culminating with
• Lula de Silva in 2002 and 2006 and
• Dilma Rousseff in 2010 and 2014
• Concerns that Lula and Rousseff administrations would
reverse market-friendly policies proved unfounded
• Pragmatism has increasingly characterized Brazil
economic policy making regardless of underlying
political ideology
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Overview VI
• Brazil’s economy in 21st century could be described as
• Hybridization of interventionist and free market approaches
made possible by Brazil’s large market size
• Policy framework has elements that are both export-oriented
and foreign investment friendly
• Also inward looking and protective of domestic industries.
• Fiscal policy favors counter-cyclical stimulus measures
• But with a concern for inflation and the exchange rate.
• Economic growth is regarded as the means to social
ends
• Broader access to better education and health
• Reduction in poverty and destitution and
• Environmental protection and conservation
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Overview VII
• Record prices world markets for primary commodities led
to an abundance of foreign reserves in Brazil in 2004
• Gave fiscal and monetary authorities enormous policy space
• Even when global markets were ensnarled by financial crisis in
2008 growing domestic consumer market made it possible for
fiscal authorities to delay the immediate effects of the external
shock and maintain spending priorities
• However, the confluence of
• a protracted recovery of global markets falling world commodity
prices, and
• worsening macroeconomic conditions
• Pressing government towards greater fiscal restraint
after four years of economic stimulus measures.
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