Brazil Research Paper

The beginning of Brazils economy started when Portugal colonized the country that is known today as Brazil. The Portuguese were in search of vast riches and they got their first taste of earnings around the 1540’s. With the popularity of sugar cane growing in Europe, the Portuguese quickly started an agricultural enterprise in their colony. The Portuguese took advantage of the Dutch through their commercial skills and financing; in order to quickly get a foothold and build a small sugar monopoly. The financing from the Dutch allowed them to set up this whole sugar cane trade remarkably fast. Allowing the Dutch to also ship the sugar back to Europe made it one less risk the Portuguese had to worry about. The trading of sugar also impacted other parts of the Brazilian colony. A slave trade was set up along with the sugar trade; this was due to the need for labor on the sugar cane mills. Slavery in Brazil ended up lasting until 1888; Brazil was one of the last countries to abolish slavery. It is estimated that about 35% of slaves involved in the Atlantic slave trade ended up in Brazil (Brazil Equitable). Around the early seventeen century the sugar trade in Brazil began to decline due to the rise of sugar production from many other countries. Sugar has and always will be a main product in Brazil.

The search for gold and precious metals in colonial Brazil became a priority in the eighteenth century. After the sugar cane farming became less lucrative many people in Brazil looked for alternatives. This was when the discovery of gold in the mountains of Minas Gerais changed the entire dynamic of the Brazilian economy. Large numbers of Portuguese along with an estimated half a million slaves flocked to this mining region. It is thought that by 1725 about half of the population lived in Minas Gerais. This was also a problem in the mother county of Portugal; they had to severely limit immigration to Minas Gerais due to the mass migration. It has also been speculated that at the height of the gold rush about 350,000 oz. of gold were extracted. The gold peaked around 1750 and by 1790 the majority of the gold was depleted (Brazilian Geography). Just like any gold rush it came to an end, this led to a period of stagnation in the Brazilian economy. The people of Brazil did not experience another increase in the economy until the introduction of a new cash crop around 1820.

In Brazil around the early 1800’s coffee was quickly becoming a staple of Brazils economy. No one would have ever guessed that the effects of coffee on Brazils economy would be bigger than gold and sugar combined. During this period in 1822, Brazil gained its independence from Portugal. By 1830 coffee was a highly sought after product on the world market. With a high demand and a low supply of coffee Brazil quickly realized they had perfect coffee growing climate. The first region that started growing coffee was in the mountains around Rio de Janeiro. Coffee production rapidly spread across the Paraiba valley and towards Sao Paulo. This urgent spread of coffee production and primitive production techniques led to an increased need for labor. Many slaves were imported to Brazil at this time to help on the farms. In 1880 Brazil produced 1.2 million 60-kilogram bags of coffee. 8 years later it had increased to 2.6 million bags (Brazil Equitable).

Finally in 1902, Brazil was exporting around 8 million bags. This increase in coffee production also meant increases in the transportation industry throughout Brazil. In 1860 there were 139 miles of railroad 15 years later it had increased to 4,310 miles. The coffee industry had a direct impact on infrastructure through out Brazil. By 1920 Brazil controlled the international coffee market producing around 80% of all coffee sold. In 1929, Brazil was selling coffee for 22.5 cents per pound; by 1931 it had dropped to 8 cents per pound (Brazil: A New Regional Power in the World Economy). The drop in coffee prices in Brazil was attributed to world events such at the Great Depression, WW I, and the rise in global production. Never the less, coffee was and is still today a focal point of Brazils agriculture and economy. *

In 1930 the revolution abolished the Old Republic that existed from 1889 – 1930. This was a federation of semiautonomous states. In 1937 a Coup established the New State (Estado Novo), which was a dictatorship that lasted from 1937-1945. Both the Revolution and the Coup started because of economic problems that began in 1930. At this time world demand for coffee, which was one of Brazil’s major exports, declined significantly as a result of the Great Depression as well as the fact that there was an excess of coffee produced in the 20’s. This drove prices down sharply and they remained at low levels into the 1930’s. Another factor that led to the crisis was foreign debt.

During this period the government was forced to suspend part of the country’s debt payments. State programs were created to support coffee prices but finally went bankrupt in 1930. This led to the central government getting involved by buying huge amounts of coffee to avoid further decreases in prices. This intervention not only provided support for the coffee industry but eventually the rest of the country.

By the late 1930’s with the government interference in coffee production, the economy was ready to grow, however, WW II got in the way. Although output increased through better utilization of existing capacity, there was little industrial and infrastructure investment, except for the steel mill created by the government,

By the end of WW II, President Vargas was overthrown, democratic rule was reestablished and trade restrictions reduced. Although with the overvaluation of the exchange rate, inflation and decreased demand meant increased imports and decreased exports. Under the Vargas government was created an import policy and fixed exchange rates that created a balance of payments problem due to curtailed exporting.

Between 1957 & 1961 the government made changes in the exchange-control system, which was the basis for import-substitution industrialization. As well, the government also introduced measures i.e. Tariff Law of 1957, to protect domestic industries and attract foreign investment. The government also enacted programs to benefit industries such as automotive, cement, steel, aluminum, cellulose, heavy machinery and chemical industries. As a result, the Brazilian economy experienced rapid growth. Between 1950-1961, the average growth for GDP exceeded 7%; industry grew by over 9% and agriculture 4.5%, although the textile industry declined (The Economist). The issue remained that import-substitution industrialization increased the balance of payments problems.

Because of problems associated with import-substitution industrialization and reforms introduced by the military after March 1964, the Brazilian economy lost much of its energy. Both GDP and industry declined. Political troubles deterred measures to control inflation and the balance of payments crisis. The 1964 coup had the objective of transforming Brazil into a capitalist economy and a military power. The regime aimed at reducing inflation, removing distortions of import-substitution industrialization and modernizing capital markets. They also introduced incentives for investment both domestic and foreign and using the foreign exchange system to deal with the balance of payments problems. Steps were also taken to improve the country’s infrastructure and develop basic industries.

The post 1964 reforms and military policies promoted rapid growth between 1968 and 1973. As well, the rest of the world was growing. The growth rate of GDP increased by 11.1% and was led by industry at 13.1% (Hewlett, Sylvia Ann). The leading sectors were consumer durables, transportation, equipment and basic industries, such as steel, cement, and electricity generation. The balance of payments issue was resolved by an increase in imports and exports. Investments expanded by both state controlled enterprises as well as public. Demand for automobiles and durable and luxury goods increased as well as housing created by credit plans and capital-market reforms.

The 1973 oil crisis affected Brazil’s trade balance in addition to an overvalued currency. Instead of devaluing the currency and containing growth, the regime chose to review strategies of import-substitution industrialization and growth. They implemented plans to increase self-sufficiency and made investments in economic infrastructure. This strategy was effective although it increased the amount of foreign debt. In addition during this same period, between 1974 and 1980, the rate of inflation accelerated (Brazil: A New Regional Power in the World Economy).

The next decade was known as the “lost decade”. Although the balance of trade moved from a large deficit to a surplus, the recession and stagnation reduced imports. Between 1981 and 1992, the GDP only increased at an annual rate of 1.4% and per capita income declined 6% (The Economist). Gross investment declined and reflected growing uncertainties of the economy. Inflation continued and prompted implementation of short-lived shock-stabilization programs.

The Plano Real (“Real Plan”) was created in the spring of 1994 with the hopes of bringing down the inflation rate by pegging the real to the U.S. dollar. Inflation was brought down to single digit annual figures, although during the transition phase came substantial real exchange rate appreciation (Bevins, Vincent). This meant that Brazilian goods were the most expensive in the world, but there was still interest in the Brazilian markets because of the stabilization of inflation. In November 1998, The IMF provided Brazil with a $41.5 billion support program in response to progress on structural reform and a fiscal adjustment program (Baer, Werner). In January 1999, the Brazilian Central Bank decided that the real would no longer be pegged to the U.S. dollar. This devaluation helped moderate the downturn in economic growth and created reassurance for investors that Brazil would maintain tight fiscal and monetary policies even with a floating currency.

The economy grew 4.4% in 2000, but with concerns about the presidential candidate and problems in Argentina in 2001, the economy slowed. In 2004 the GDP growth was 5.7%, in 2005 it was 3.29%, in 2006 it was 3.7%, in 2007 it was 5.4% and 2008 5.1%. In 2009, due to the world financial crisis, Brazil’s economy was expected to slow. The GDP was flat but then again in 2010 it grew to a record-hitting rate of 7.5%! Then in 2011, the GDP slowed to a rate of 2.7% due to uncertainties in the world economic climate as well as a lack of competitiveness, an inadequate work force, rising inflation, unemployment and a lack of faith in the government (Baer, Werner).

Currently Brazil’s economy is the sixth largest in the world, expected to be fifth by the end of this year. Brazil is one of the fastest-growing major economies in the world with an average annual GDP growth rate of over 5%. This year the economic growth forecast was recently downgraded to 2% from 3% due to the global economic crisis and China’s economic downturn (Brazil Economy Emerges From Slowdown as Stimulus Takes Hold).

Brazil has proven that they have a thriving agriculture and food production sector of their economy. They are for the most part self sufficient in food and have a well-diversified agriculture. It is also important to understand that they have two different agricultural areas that utilized. One of the areas is the southern half of the country; its high rainfall, more experienced farmers, more fertile soil, and semitemperate climate characterize the region. This section produces most of the countries export crops, oilseeds, and grains. The other region is in the Amazon basin and northeastern part of the country. Subsidence farmers mainly occupy these areas.

This northeastern area receives less rainfall, the farmers are less experienced, the infrastructure is weak at best, but it has good soil (Geography and Map of Brazil). One quarter of the country is involved in the agriculture sector along with 8 % of the country’s GDP. It is estimated that around 60 % of the country’s agricultural production is field crops and the other 40% is livestock. Brazil is the world largest producer of coffee and sugarcane, but they also produce cocoa, tobacco, soybeans, forest products, orange juice, other tropical fruits and nuts. Food and agricultural products accounts for about 35 % of Brazil’s exports.

Brazil currently has a thriving industrial sector which is the second largest in the Americas. Brazils industry is primarily located in the south-southeast sector of the country. Brazil has a wide variety of industries such as steel, computers, petrochemicals, automobiles, aircraft, consumer durables and so on which account for as much as one third of the GDP. This is not to say that Brazil’s service industry is underdeveloped by any means. The banking sector is responsible for about 16% of the GDP. Brazils stock market is also one of the largest in the world; this is due to the São Paulo Stock Exchange, the São Paulo-based Brazilian Mercantile and Futures Exchange merge that occurred in 2008. This unification created the stock exchange, which is currently known today as BM&FBOVESPA. Brazil is very successful in part due to the abundance of natural resources. Since 2006, Brazil has become oil self sufficient along with energy self-sufficient.

Keeping in mind that Brazil is the largest in size and in population in South America it is incredible that they are energy self-sufficient. 90% of the country’s electricity is produced by hydroelectric power. Brazil currently has the largest dam in the world, the 19,900-megawatt Itaipu Dam on the Paraná River. Brazil currently has one nuclear plant the AngraI and plans to build many more by the year 2020 (Brazilian Geography). Brazil is also the top producer of ethanol and it has drastically reformed its own policies towards using fossil fuels. The country successfully reduced 10 million cars that run on fossil fuels and substituted them for ethanol use. Brazil has made amazing achievements in the energy sector; this is very impressive due to the fact that Brazil is the tenth largest energy consumer in the world.

Currently about 85 % of the country’s exports consist of semi-manufactured and manufactured products. Brazil has reached the status of 8th largest economy in the world. This large economy is due to many different factors one of which is domestic production has increased 32 % in the last decade. Also agribusiness has grown about 3.6 % per year, earning the name of the most dynamic sector (Geography and Map of Brazil). Brazil has also set up The Programa de Aceleração do Crescimento that is a main infrastructure program designed to accelerate Brazils economy. This program has a budget of $503.9 billion reals and is entailing a set of investment projects and economic policies.

Brazil has an advanced and sizeable economy that includes industry, agriculture, and manufacturing. The country is also making great improvements in boosting foreign reserves, improving macroeconomic stability and unemployment is at an all-time low. Brazils story is one of rags to riches, as this was a Portuguese colony that started its economy based on agricultural exports. Today Brazil is a growing presence in the world market along with having the largest economy in the south Americas.

Bibliography

Bevins, Vincent. “Brazil’s Economic Slowdown so Far Leaves Many Unscathed.” Los Angeles Times. Los Angeles Times, 13 Aug. 2012. Web. 30 Oct. 2012. <http://articles.latimes.com/2012/aug/13/world/la-fg-brazil-no-boom-20120813>. This article of the Los Angeles times is very moving. It has great first hand accounts of how the Brazilian economy has affected the people of the lower class in a positive manor. The author does a great job of explaining the economical causes and effects world wide of Brazilian actions. He explains how the people living in poverty are very hopeful of their futures and how life is better in the favelas. Finally the author gives good facts about employment and wages for the citizen in Brazil.

“Brazil Economy Emerges From Slowdown as Stimulus Takes Hold.” Bloomberg. N.p., n.d. Web. 30 Oct. 2012. <http://www.bloomberg.com/news/2012-08-31/brazil-s-economy-emerging-from-slowdown-as-stimulus-takes-hold.html>. In this article it explains how the economy is making a comeback from what seemed as an economic decline. The topic of industrial investments is touched upon bringing up the ideas of GDP and how that it affects the economy. The point that the government is taking its role very seriously and is doing all it can to help the economy in the form of cutting payroll taxes, lowering levies. The author talks about the debt trouble and how it will take at least 30 months to recover to a normal rate.

Brazil Equitable, Competitive, Sustainable, Contributions for Debate. Washington, DC: World Bank, 2003. Print. This book has good information about Brazil. It includes large amounts of information along with great analisis.it incudes information like how Brazil is endowed with a highly entrepreneurial people, rich cultural heritage, precious natural resources, well-developed socio-political institutions and a sophisticated economy. The novel also brings up good points about brazils relation with the World Bank. Also it talks about past present and anticipation for the future of Brazil. This book is broken up into four sections. Each of these sections has different of important ideas about Brazil.

“Brazilian Geography.” Brazilian Geography. N.p., n.d. Web. 30 Oct. 2012. <http://www.kidscornerbrazil.org/content/geography.php>. This web site has great information pertaining to the geography of Brazil. It has many interesting facts about Brazil and how the country matches up with others in South America. The author also gives great visuals to help get a feel for the climate of Brazil and puts the entire country into climate subtopics. One of the most helpful things on this website is how the government is represented throughout the country. There is a map that shows the different federal states through out the country, this is very useful. It also explains the government structure and how it is set up. Finally this site gives good information about the hydrologic recourses and how Brazil takes full advantage of its river system through the form of hydroelectric damns.

Chaffee, Wilber A. Desenvolvimento: Politics and Economy in Brazil. Boulder, CO: L. Rienner, 1998. Print. The book begins with a short economic history of Brazil since 1940 and a treatise of desenvolvimento, the thought of growth that has molded Brazil’s economic choices for more than five decades. The later chapters talk about political macroeconomic problems particularly inflation, unemployment, and a range of inequalities. The book later goes into how the Brazilian economy has long been characterized by rapid growth, but equally by high inflation and an extreme uneven distribution of wealth, despite the tough international reputation of the country’s economists. Searching to explain this, Chaffee links political interest with economic policy, displaying how short-term political needs have taken priority over long-term economic values.

The Economist. The Economist Newspaper, n.d. Web. 30 Oct. 2012. <http://www.economist.com/blogs/freeexchange/2012/10/growth?zid=305>. This article is very useful when trying to analyze Brazils economic growth over the past years. The author has many comparisons between Mexico and Brazil the two leading country in Latin America when it comes to economies. It has a great chart that shows the sources for real GDP growth in the past twenty years. There is also a great analysis of this chart. Also at the bottom of the article many people submit their own opinion of it. It is very useful to see how others view this topic and all the different points of view. The author also gives his opinion on where the two countries will be in the next decade but of Couse it is all highly speculative and very difficult to predict.

“Geography and Map of Brazil.” Geography and Map of Brazil. N.p., n.d. Web. 30 Oct. 2012.

<http://geography.about.com/library/cia/blcbrazil.htm>.

This is one of the most factual websites about Brazil. It is loaded with tons of information about the geography of the county. The map on this site really gives the reader a good understanding of the size and how big Brazil truly is. There are also great facts about the people of Brazil and how the population is mad up of different races. You can find excessive material about transportation and communication through out the whole country. Some of the most useful information is about the government and the economy with awesome overviews of both topics.

Hewlett, Sylvia Ann. The Cruel Dilemmas of Development: Twentieth-century Brazil. New York: Basic, 1980. Print. This book is about Brazil and how economic development is achieved at the cost of increased poverty and political repression. The realization of the uneven distribution of wealth is also brought up. The author points out that the differentiations between early and late development means that the industrialized West is useless as a model for the Third World. In particular, the introduction of capital-intensive, labor saving industry will not help employment and without successful labor unions and democratic methods the wealth will never have a chance at being even slightly distributed. The novel also bings up the notion that In stratified Brazil, the outcome has been rather to add a small, well paid, trained labor force to the wealthy and to reduce the living conditions of those, drawn to the successful cities, for whom there is no work. Also the book includes info about the military regimes and how that have affected the county.

Baer, Werner. The Brazilian Economy: Growth and Development. New York: Praeger, 1989. Print. This novel has been one of the best resources in research on the economic development of Brazil. The book explains what occurred in Brazil from the turn of the century onward. Such a large amount of what occurs in Brazil is different from other countries. This book provides fantastic details on what exactly happened with each new policy that was implemented in Brazil. Most other sources fail to do this seemingly basic work. This book thought it offers some commentary on what occurred in the political sense, primarily provides you the facts and links those facts. This novel is very useful.

“Brazil: A New Regional Power in the World Economy (Geography of the World-Economy) [Hardcover].” Brazil: A New Regional Power in the World Economy (Geography of the World-Economy): Bertha K. Becker, Claudio A. G. Egler: 9780521370080: Amazon.com: Books. N.p., n.d. Web. 31 Oct. 2012. <http://www.amazon.com/Brazil-Regional-Economy-Geography-World-Economy/dp/0521370086>.

This book talks about the rainforest in the amazon and how that affects Brazil. The authors also show how the 1970s witnessed a period of immense economic growth in Brazil, yet more than half the population lives in poverty. Professors Becker and Egler assess these current dilemmas by explaining the process of Brazil’s entry into the capitalist world-economy. They trace this growth from brazils beginnings as a Portuguese colony to its transformation as the eighth-largest world economy and a regional power in Latin America. Becker and Egler combine history, economics, geography, and political science in an understandable view of Brazil’s growth and this new and compelling approach enables comparative analysis with other countries. This book is full of great information.