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An Overview of Brazil’s Economy February 1st, 2012 Team Itaú: Shivani Arora Colleen Butts Lakshmi Gupta Spencer Jones AGENDA • • • • • • Overview Major Economic Sectors Economic History Strengths and Weaknesses Political Influences Outlook CURRENT SNAPSHOT The worlds seventh wealthiest economy Current President Dilma Rousseff GDP = $2.1 trillion GDP per capita (PPP, 2010): US $11, 127 Literacy Rate, adult total - 90% Labor Participation Rate – 65% Unemployment = 4.7% Population: 190.7 million Inflation = 6.5% PRIMARY EXPORTS Value = $199.7 billion • Transport Equipment • Iron Ore • Soybeans • Coffee • Footwear Major Export Partners Germany, 4.05% Netherlands, 5.39% China, 12.49% Argentina, 8.40% US, 10.50% *Based on 2010 PRIMARY IMPORTS • • • • Value = $187.7 billion Major Import Partners Machinery Japan, 4.30% Electrical and Transport Germany, US, 16.12% Equipment 7.65% Chemical Products Argentina, 8.77% Oil China, 12.61% *Based on 2010 AGRICULTURAL SECTOR • GDP: 6.1%, Labor Force: 20% • Sugarcane, Coffee, Soybeans • Cattle: 1.1 Million Tons (2011), $4.8 Billion Revenue • Issues: Greenhouse Gas Emissions, Deforestation and Water Pollution INDUSTRIAL SECTOR • GDP: 28%, Labor Force: 14% • Manufacturing: Steel, Machinery, Automobile Parts, Aircrafts, Chemicals, Consumer Durables • Mining: Nickel, Tin, Zinc • Mineral Resources: Iron and Manganese • Hydroelectric Power: 69%, 77,000 megawatts • Biofuel Production and the United States SERVICE INDUSTRY • GDP: 67.5%, Labor Force: 66% • Banking: Itaú Unibanco, Banco Bradesco, Bank of Brazil • Telecommunications, Energy Commerce, Computing BRAZIL‘S ECONOMIC TIMELINE Sweeping changes Spectacular Growth Hyperinflation to Stabilization • • • • • Political & Economic 1930 revolution: Old Republic abolished New State dictatorship • • 1950s GDP growth rate jumped to 11% External trade expansion 1973 Oil shock 1960s 1970s • 1980s Stagnation & Industrialization Stagnation, Inflation and Crisis • • • • • Import substitution of consumer goods Rapid growth for manufacturing post 1964 GDPgrowth rate down to 4% Bankruptcy leading to a stabilization plan Political instability • More oil-shocks Economic decline: IMF control: inflation at 5000% Termed “lost decade” 1990s 2000s - Now Economic powerhouse • • • • End of inflation Rise of consumerism Growth of 7.5% in 2010 Lula Silva’s rise to power PLANO REAL • Measures Taken to Stabilize Economy in 1994: • New Fiscal Strategy – privatization of State companies • Monetary Reform – created an index URV, and plural reasis became new currency • Opened up economy to international investors STRENGTHS • • • • • Largest Recipient of FDI in Latin America Global Leader in Science and Technology Advanced Industrial Sector Exports: Natural Resources, Agriculture No longer dependent on foreign oil WEAKNESSES • Poverty • Domestic Debt • Inequality CURRENT ECONOMIC ISSUES • External Shocks • FDI and over-speculation could cause bubbles • Interest rate adjustments – Risk of “bad equilibrium” • Exchange rates and the appreciated real • Corruption SECTOR-SPECIFIC ECONOMICSs • Industry vs. Emissions • Agriculture and Energy vs. Deforestation • Meeting Brazil’s energy demands OUTLOOK • Tighter monetary and fiscal policy • Inflation continues to be an issue • Strong economic recovery following global recession RESOURCES http://www.economywatch.com/world_economy/brazil/industry-sector-industries.html http://www.state.gov/r/pa/ei/bgn/35640.htm#econ http://www.guardian.co.uk/environment/2009/nov/10/brazil-emissions http://www.bloomberg.com/news/2011-12-23/brazil-s-top-banks-tighten-grip-onloans-as-yields-soar-for-small-rivals.html http://www.gfmag.com/gdp-data-country-reports/311-brazil-gdp-countryreport.html#ixzz1krfqM9gQ http://www.state.gov/r/pa/ei/bgn/35640.htm http://www.bbportuguese.com/economic-history-of-brazil.html http://www.thedailybeast.com/newsweek/2001/09/03/the-nerd-who-saved-brazil.html http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-savedbrazil http://internationalbusiness.wikia.com/wiki/Brazilian_Economic_Systems_Strengths/We aknesses https://mninews.deutsche-boerse.com/index.php/sp-brazil-well-prepared-smooth-outexternal-shocks?q=content/sp-brazil-well-prepared-smooth-out-external-shocks RESOURCES http://www.americasquarterly.org/node/3255) http://online.wsj.com/article/BT-CO-20120123-706648.html) http://www.bloomberg.com/news/2011-09-12/brazil-economists-see-faster-inflationslower-growth-after-rate-reduction.html, http://mrzine.monthlyreview.org/2011/bp311211.html http://www.washingtonpost.com/business/brazilian-tourists-spend-a-record-amount-ofdollars-abroad/2012/01/24/gIQAqWRXNQ_story.html http://www.tradingeconomics.com/brazil/current-account, http://www.france24.com/en/20110708-brazil-accuses-china-us-over-currency-policy http://www.businessweek.com/news/2012-01-20/brazil-futures-yields-decline-as-centralbank-signals-more-cuts.htmlP http://en.mercopress.com/2011/09/20/brazil-sponsors-forex-anti-dumping-importbarriers-to-compensate-us-dollar-devaluation http://www.econ.puc-rio.br/gfranco/How%20Brazil%20Beat%20Hyperinflation.htm