The International Economic Environment of Brazil

The International

Economic Environment of

Brazil

Ms. Joyner Gwendolyn Rodrigues.

Student Number – 3769537

The International Economic Environment of Brazil

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UNIVERSITY OF WOLLONGONG in DUBAI

College of Business

Project report

Title: The International Economic Environment

Of Brazil

in partial fulfilment of requirement of the subject:

TBS983 International Business Economic

Environment

for the MIB Program Autumn 2009

By

Ms. Joyner Gwendolyn Rodrigues

Student ID: 3769537

Submitted to: Dr. Gwendolyn Rodrigues

Date: 31st March 2010


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EXECUTIVE SUMMARY

The largest country in South America, Brazil is a country blessed with abundance

natural resources and manpower. Being surrounded by the Atlantic Ocean to it east, the

country has an advantage for international trade unlike land lock countries.

Brazil’s economy has seen many ups and downs during the different periods of

globalization. Being a labour intensive country from the first wave of globalization has been

engages in agriculture sector and manufacturing of consumer goods. The country’s economy

has grown substantially in last few years. Speculations are been made that Brazil may emerge

as one of the leading and powerful economies by 2050.

Brazil an active full member of the Southern Common Market (MERCOSUR), the

prime trading bloc in South America along with the World Trade Organization. The

European Union and USA are the country’s trading partners. Brazil exports and imports a

variety of goods and services, to and from different parts of the globe. Recently ethanol

stands as it major produce goods and export.

In terms of its GDP, Brazil continues to open up at a steady pace between 25% to

28%. In 2009, Brazil’s Gross Domestic Product was value at USD 1,543.7 billion and in

accordance with the World Bank, It comprise 2.60% of the world economy.

The surplus in Brazil’s Current Account during 2003 – 2007 , pooled together with

the surplus in the Capital And Financial Account ever since 2006, has permitted a substantial

buildup of foreign exchange reserves which is estimated at more than 200 USD Billion in

2008.

The country is one amongst a small number of countries in up-and-coming world

market can who can survive global crises with no fear about increasing interest rates or

implementing other disaster measures. This clearly shows that even at a slower pace the

Brazil is rising and stirring forward as a powerful future economy.


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TABLE OF CONTENTS

Chapter 1. Introduction to Brazil. Pg 6 – 8

1.1 Socio – Cultural Environment Pg 7

1.2 Legal Environment Pg 7

1.3 Economic Environment Pg 7

1.4 Political Environment Pg 7

1.5 Technological Environment Pg 8

Chapter 2. The Influence of Globalization on Brazil Pg 9 – 14

2.1 The Waves Of Globalization Pg 9

a. First Wave: 1870 – 1914 Pg 9

b. Second Wave: 1945 – 1980 Pg 10

c. Third Wave: 1980 – Present Pg 11

2.2 B R I C Pg 13

Chapter 3. Brazil’s International Trade Pg 15 – 22

3.1 Trade Policy Pg 15

3.2 Trade Balance Pg 16

a. Exports Pg 18

b. Imports Pg 19

3.3 Openness Index Pg 20

3.4 Direction Of Trade Pg 21


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Chapter 4. Economic Indicators of Brazil Pg 23 – 25

4.1 Gross Domestic Product Pg 23

4.2 Balance of Payments Pg 24

Conclusion And Recommendations Pg 26

References Pg 27 - 29

6.1 Gross Domestic Product Pg 27

6.2 Print Pg 28


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CHAPTER ONE

INTRODUCTION OF BRAZIL

Located in the southern hemisphere, the Federative

Republic of Brazil (Brazil) is the biggest country in the

continent of South America with total area of 8,456,510 sq

km. The Atlantic Ocean, is to the east of Brazil, to its north

French Guiana, Suriname, Guyana, and Venezuela, while

Colombia is to its northwest. To Brazils west we have Bolivia, Peru, Argentina and Paraguay

and to its south we have Uruguay.

Before its independence in 1822 Brazil was a colony of Portugal. Since its Republic

in 1889, the Brazilian Constitution defines the country as Federal Republic. Inaugurated in

1960, Brasília, till

date remains the

capital city of

Brazil. Today

Brazil is also one

the future BRIC

countries of the

world. The

SLEPT analysis of

Brazil will give

deep insight to the

country.

http://en.wikipedia.org/wiki/Atlantic_Ocean

http://en.wikipedia.org/wiki/French_Guiana

http://en.wikipedia.org/wiki/Suriname

http://en.wikipedia.org/wiki/Guyana

http://en.wikipedia.org/wiki/Venezuela

http://en.wikipedia.org/wiki/Colombia

http://en.wikipedia.org/wiki/Bolivia

http://en.wikipedia.org/wiki/Peru

http://en.wikipedia.org/wiki/Argentina

http://en.wikipedia.org/wiki/Paraguay

http://en.wikipedia.org/wiki/Portugal

http://en.wikipedia.org/wiki/Federal_republic

http://en.wikipedia.org/wiki/Bras%C3%ADlia


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1.1 Socio – Cultural Environment

Brazil is a land which comprises of immigrants from a mixture of ethnic groups

worldwide, which led to the formation of the heterogeneous Brazilian culture. In the region,

around 210 languages are spoken out of which Portuguese and English are the main

languages. The Brazilian ethnicity has been fashioned not only by the Portuguese, but also by

the country's inhabitant Indians, and other immigrants from Europe, African, the Middle East

and Asia. (Global Aware, 2010)

1.2 Legal Environment

The Brazilian legal system is based upon the Federal Constitution. It is the primary

law of Brazil. Different states within the country have law of their own. Beside the main

Federal Constitution the main legal documents in Brazil are the Brazilians codes like the

Civil Code, the Tax Code, and the Penal Code. The legal arrangement is of Roman practice

and all laws are ordained to control and regulate all kinds of situations. (Graziele, 2009).

Investors, who would want to invest, must understand both industrial as well as regional

differences within the country.

1.3 Economic Environment

Brazil is a country which is largely characterized by its developed agricultural

sectors as well as it developing industries. With the support of the World Bank, the country is

emerging as the future leading economies of the world. The country has gradually enhanced

macroeconomic stability, strengthening foreign reserves, decreasing its debt, working to an

inflation objective, and also committing to fiscal dependability. (CIA – World Factbook,

2010). In spite of the global regression which hit during 2008, Brazil economy emerged as a

new and strong market. Brazil has a current GDP rate of 18% and in 2009 Brazil had a

nominal GDP of USD 1,543.7 billion. (EDC, 2010).

1.4 Political Environment

Due to the political environment which is conductive to growth, Brazil has emerged

into an astounding economy. President Lula da Silva, elected in 2002, campaigned a policy

emphasizing on public and community programmes and alter political policies. High levels of


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corruption, thus social unrest among the majority of Brazilians. (Graziele, 2009). The

government of Brazil is a democratic republic government.

1.5 Technological Environment

In the previous 25 years, Brazil has emerged as the largest scientific and

technological environment in Latin America. In order to stimulate technology and science

within the masses, the Brazilian government laid the Innovation law, which provided a legal

structure needed to improve Brazil’s capacity to produce and commercialize technology.

(W.I.P.O, 2008). Strong and concentrated public R&D structure, within the country has given

a significant boost to private – public sector participation. The support of the government has

lead Brazil to improve on its infrastructure, communication and I.T sectors.


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CHAPTER TWO

THE INFLUENCE OF

GLOBALIZATION ON BRAZIL

Globalization is not a current occurrence. It has been in motion since the beginning of

trade. Because of its new term, we misunderstand it as a new phenomenon. Globalization –

An in progress course of action by which societies, cultures, and economies of different

countries have been integrated through communication, technology and trade. In this book,

‘The World Is Flat’, Author Thomas Friedman states that the world is no longer a round

globe, but a flat levelled playing field; where all the countries of the world are activate

participants, not just USA and Europe.

2.1 The Waves Of Globalization

a. First Wave: 1870 – 1914

The foremost wave of globalization occurred for the duration of 1870 till

1914. It was triggered because of the decrease in transport costs and new technologies

along with the lessening in tariff barriers. During that time, falling shipping costs

reduced the natural barrier of distance, contributing to a rise in merchandise trade to

levels comparable to today and also facilitating the emigration. (Reflections on the

Impact of Globalization, Aninat E et al, 2001). For the duration of this period, Brazil

and other South

American Countries

was a destination for

labour, and thus

manufactured goods.

Moreover because of

the abundance of land

in Brazil, the country

engaged agricultural

occupation primarily


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plantation of coffee. The bang in coffee manufacturing brought almost many European

immigrants, and also brought about the country’s Republic. Export of food grains and

raw materials to the industrial economies brought money into the country.

b. Second Wave: 1945 – 1980

Post Second World War era gave rise to a fresh wave of globalization, which took

place between the eras of 1945 to 1980. The continuous decrease in transportation cost

helped to further promote the expansion of international trade. This in turn improved

income levels worldwide. Multilateral organizations, such as GATT and the IMF,

contributed to this trend, helping countries to see integration as a two-way street, and

providing a safety net for countries embracing openness. (Reflections on the Impact of

Globalization, Aninat E et al, 2001). Brazil’s GDP 1929 was around US$ 900 (1996 US$

dollar), however 1980 GDP reached around US$ 5,400 (at 1996 US$ dollars). (The

Brazilian Economy – 1928-1980, Marcelo de Paiva Abreu, 2000). In 1979 agricultural

employment reduced to 30.2% and manufacturing employment increase to 20.6%.

Employment or under employment in the services sector rose from 22.3% to 50.8%. (The

Brazilian Economy – 1928-180, Marcelo de Paiva Abreu, 2000) The export-GDP ratio

chop down to 10% post the Second World War. In the mid-1960’s it was more or less

4%. Gradually after 1964 the ratio progressively rose and achieved 8.3% by 1980. (The


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Brazilian Economy – 1928-1980, Marcelo de Paiva Abreu, 2000). The import GDP-ratio

reached minimum values of 4.3% in 1953 and 4.1% in 1964. For most of the 1960’s and

1970’s the ratio was below 7%. Nevertheless, due to the steep rise in oil prices, in 1974 it

was 11.3% and in 1980 it was 9%. (The Brazilian Economy – 1928-1980, Marcelo de

Paiva Abreu, 2000).

c. Third Wave: 1980 – Present

Since the 1980’s we are breathing in a latest wave of globalization. Characterized

once again a technological revolution, the latest wave has seen and is still seeing the

continuous expansion in variety and value of services that are been traded along with

mercantile trade. In 1980 there was a visible change of path for the Brazilian economy In

the 1900s that change and the growth in the economy became outstanding. At the start of

this era, the government made efforts to reduce high tariff protection from 57.5% in 1987

to 32.4% in 1989. (The Brazilian Economy – 1980-1994, Marcelo de Paiva Abreu,

2004). Trade liberalization and the privatization of public-owned assets in 1993-94,

concentrated inflation on a continuous foundation. (The Brazilian Economy – 1980-1994,

Marcelo de Paiva Abreu, 2004). In Brazil suffered its worst recession in 1981-1983, its

GDP was knocked down 4.9% from its peak in 1980. The level of economic activity in

terms of GDP was on the rise on an average 7% in 1984. (The Brazilian Economy – 1980-

1994, Marcelo de Paiva Abreu, 2004).


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The years 1993 and 1994 were excellent years for the Brazilian economy in terms

of GDP growth which was at 4.9% and 5.8%, the maximum from the time in 1986.

During these years trade surplus was US$ 13 billion and US$ 10 billion respectively

inflow of foreign direct investment in 1994 was US$ 8.1 billion in 1994.

15 January 1999 – The Cardoso government stated that the REAL would not be

pegged to the US dollar. This led to the devaluation of the REAL by 45%. Regardless of

the devaluation, the economy showed optimistic. Brazilian exports became more

aggressive, which led to the increase in export income by 2000. GDP grew by 4.5%.

Progress nevertheless, fell to 1.4% in 2001 due to the US recession which resulted in the

international decelerate rate of export demand.


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2.2 B. R. I. C

BRIC is the short form for the economies of Brazil, Russia, India and China

collectively. The term was

original used by Jim O'Neill

of Goldman Sachs in 2003.

The Goldman Sachs report

speculated that by the year

2050, these four economies

would be richer than the

majority of the existing

foremost economic powers today. In less than 30 years from today the BRIC economies

together would be larger than USA’s economy. By 2025, the BRIC economies speculate to be

larger than the G6 economies i.e. the economies of The United states of America, United

Kingdom, Japan, Italy, France and Germany. The BRIC nations represent 40 percent of the

world’s population and together, a growing economic force.

Brazil is most alike to

its BRIC equivalent Russia

and unlike from China and

India. Brazil started its own

ethanol program based on its

wealthy sugar produce.

Brazil using deep-sea

drilling methods has opened

its own offshore oil

exploration. It’s gained an

extraordinary quantity of

energy self-reliance which

sets it apart from a large

amount of the world. Plus,

the primary strength of Brazil, its merchandise is expected to witness the region’s increase in

strength to become the one of the world’s principal economy by 2015. (The Brazil BRIC:

Ready to Shine, Ellis C, 2009).


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CHAPTER THREE

BRAZIL’S INTERNATIONAL TRADE

In the present world situation, a single country cannot exist in economic isolation.

Every aspect of a countries economy is linked with the economy of other country or

countries. This linkage takes shape in the form of international movement of goods and

service or in other words in the form of international trade.

3.1 Trade Policy

Ever since 2004, when World Trade organization reviews the Brazilian Trade Policy, the country has

sustained with the slow but sure modernization and reformation of its trade system. The government

has also escalated its average tariff protection. The Brazilian government also have improved on

ideas to encourage market competition and an efficient distribution of resources.

Multilateral trade arrangements are the core the Brazilian Trade Policy. Brazil is a member as well as

an active participant in the world trade organization. The country was also an active member of the

GATS negotiations on telecommunications and on financial services. (W.T.O, 2009). The country has

also been participating in the improvement of Aid-for-Trade, where it plays a twofold role of a

recipients as well as a donor. (W.T.O, 2009).

Brazil an active full member of the Southern Common Market (MERCOSUR), the prime trading bloc

in South America. In terms of value of trade, this is the country’s most prefer trade arrangement.

Never the less, only 10% of it total trade take place with MERCOSUR.As part of MERCOSUR,

Brazil has preferential trade agreements with Bolivia, Chile, Colombia, Cuba, Ecuador, Mexico, Peru,

and Venezuela. (W.T.O, 2009). Along with MERCOSUR, Brazil also has joint agreements with a

small number of LAIA members. (W.T.O, 2009).

In an attempt to simplify and refashion its customs measures, Brazil, For example, introduced a fast

import declaration system for regular importers, and also modernized procedures for inspection.

(W.T.O, 2009).

Brazil has increased its overall tariff protection from 10.4% in 2004 to 11.5% in 2008. The maximum

rate of 35% applies to 4% of all tariff lines, counting, textiles, motors vehicles, clothing, and tyres. All


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tariffs applied by Brazil are ad valorem. (W.T.O, 2009). The countries entire tariff agenda is at a

standard of 30.2. (W.T.O, 2009).

3.2 Trade Balance

A countries trade balance is between its monetary value of exports and import. It

comprises of the largest section of a country's balance of payments. Debit imports, as there is

an outflow of money. Credit exports, as there is an inflow of money to inflow of money into

the country. A trade balance is deficit if it imports exceed exports and is surplus if exports

exceed imports.

As seen

in the Graph

below, at the

start of year

2009, the

Brazilian

economy had a

deficit in its

trade balance

by 530.0 USD

Million, however during the year the country started exporting more than importing and thus

by the end of the year, the country has a trade balance of 25,328USD Million. Figure – V.3

Trade Balance – FOB of Brazil, shows us that by the end of the year 2009, exports were at

the value of 152,995 USD Million and its imports were at the value of 12,664 USD Million.


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Economic Indicators M ar 24, 2010

V.3 - Trade balance - FOB

US$ millio n

P erio d Expo rts Impo rts B alance

M o nth Year 12 mo nths M o nth Year 12 mo nths M o nth Year 12

mo nths

Value % Value Value % Value % Value Value %

change1/

change1/

change1/

change1/

2005* Dec 10 916 18.5 118 529 118 529 22.6 6 560 15.4 73 600 73 600 17.1 4 356 44 929 44 929

2006* Dec 12 265 12.4 137 807 137 807 16.3 7 213 9.9 91 351 91 351 24.1 5 052 46 457 46 457

2007* Dec 14 231 16.0 160 649 160 649 16.6 10 592 46.9 120 617 120 617 32.0 3 638 40 032 40 032

2008* Dec 13 817 -2.9 197 942 197 942 23.2 11 501 8.6 172 985 172 985 43.4 2 316 24 958 24 958

2009* Jan 9 782 -26.3 9 782 194 447 19.3 10 311 -16.5 10 311 170 942 37.3 - 530 - 530 23 506

Feb 9 586 -25.1 19 368 191 234 15.5 7 825 -34.5 18 137 166 815 29.1 1 761 1 231 24 419

M ar 11 809 -6.4 31 178 190 430 15.2 10 053 -13.5 28 190 165 242 25.9 1 757 2 988 25 189

Apr 12 322 -12.4 43 499 188 694 13.0 8 627 -30.0 36 817 161 542 19.4 3 695 6 683 27 151

M ay 11 985 -37.9 55 484 181 375 5.1 9 348 -38.6 46 165 155 664 10.6 2 636 9 319 25 711

Jun 14 468 -22.2 69 952 177 249 -0.5 9 862 -37.8 56 027 149 660 1.6 4 606 13 925 27 589

Jul 14 142 -30.9 84 093 170 940 -7.3 11 229 -34.4 67 256 143 766 -6.5 2 913 16 838 27 174

Aug 13 841 -29.9 97 934 165 034 -12.7 10 775 -38.2 78 031 137 094 -14.1 3 066 19 904 27 940

Sep 13 863 -30.7 111 798 158 880 -18.5 12 539 -27.3 90 570 132 374 -20.3 1 324 21 228 26 506

Oct 14 082 -23.9 125 879 154 449 -21.9 12 753 -25.8 103 323 127 943 -25.2 1 328 22 556 26 506

Nov 12 653 -14.2 138 532 152 350 -23.2 12 039 -8.2 115 362 126 863 -26.3 614 23 170 25 486

Dec 14 463 4.7 152 995 152 995 -22.7 12 285 6.8 127 647 127 647 -26.2 2 178 25 347 25 347

2010* Jan 11 305 15.6 11 305 154 518 -20.5 11 471 11.2 11 471 128 807 -24.6 - 166 - 166 25 711

Feb 12 197 27.2 23 502 157 129 -17.8 11 803 50.8 23 275 132 785 -20.4 394 228 24 344

Source: M DIC/Secex

1/ Change from the same period of the previous year.

* Preliminary data.

N ot e: On July 10, 2007, export data from December 1999 on were revised so as to include exports registered by Simplif ied Export Declarat ion (DSE).

See methodology on: http:/ /www.desenvolvimento.gov.br/arquivo/secex/exportacoes-por-DSE.doc.


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a. Exports

The fast-growing Brazilian economy is fuelled by its exports. Brazilian is one

of the largest exporting countries in the world with an export value of 152,995 USD

Million at the end of 2009.

The country is the world’s foremost exporter of agricultural and food based

goods like Soybeans, oranges, rice, sugar, coffee, Brazilian nuts, beef and orange

juice. Since the country is a labour intensive one, its exports also include shoes and

other leather produces motor vehicles, electric equipments, transportation equipments

and many more. Due to it abundance in natural resources, Brazil’s also exports wood,

iron ore and crude oil.

As seen in the figure along side, the major part of the Brazilian exports is

contributed by the European Union and North America

Brazil is the second leading manufacturer of ethanol and the primary exporter

of ethanol too. In 2008

Brazil manufactured 27

million cubic meters in

of ethanol fuels

(anhydrous and

hydrated ethyl alcohol)

Exports reached 4.2

million cubic meters in

2008 ( W.T.0, 2009).


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b. Imports

Brazil is more of a labour intensive country than a capital intensive one, thus

Brazilian exports are labour intensive good like agricultural produce, while its

imports are capital intensive good like technology, machinery and foreign direct

investments. In mid 2008, Brazilian FDI was about 45 USD Billion. In order to

produce better goods to supply domestically and internationally, the country

major imports include industrial capital gods from USA and Europe. Brazilian

main imports consist of Machinery and Equipment (26%) and Chemicals (16%).

(EDC, 2010). Imports were at the value of 12,664 USD Million at the end of

2009.


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3.3 Openness Index

Openness index is a marker of how much the country participates in the globalization.

It relates to the international trade of the country i.e. exports and imports in the country’s

economy. Openness index of a country is the shown as the nation’s exports plus imports as a

percentage of its GDP.

𝑶𝒑𝒆𝒏𝒆𝒔𝒔 𝑰𝒏𝒅𝒆𝒙 = (𝑬𝒙𝒑𝒐𝒓𝒕𝒔 + 𝑰𝒎𝒑𝒐𝒓𝒕𝒔)

𝑮𝑫𝑷

Exports And Imports Of Goods And Services

Of Brazil’s As A Percentages Of Gross Domestic Product.

Year

Exports as a

percentage of

GDP

Imports as a

percentage of

GDP

Exports plus imports

as a percentage of

GDP

2000 10 12 22

2005 15 12 27

2007 14 12 26

2008 14 14 28

Source – The World Bank Group

The Graph below shows the openness of the Brazilian economy from 2000 to 2008. As we

can see the economy continues to open up at a steady pace between 25% to 28% in terms of

its GDP. We thus conclude that Brazil plays a very important role in international trade.

0

5

10

15

20

25

30

2000 2005 2007 2008

Exp

ort

s p

lus

imp

ort

s as

a p

erc

en

tage

of

GD

P

Years

Openness Of The Brazilian Economy


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3.4 Direction Of Trade

The main destination for Brazilian exports is the European Union. According to the

year 2008, the share of the European Union in Brazil’s exports is nearly 21.4% and it

generates about 32 Million Euros. Likewise with its imports Brazil imports most of it good

from the European Union at 31Million Euros. The European Union imports consist of 23.5%

of the Brazils total imports in 2008.

Following the European Union, the USA is Brazils next big trade partner with and

export share of 15.2% and import share of 14.7% n generating about in 23 Million Euro in

exports and 19 Million Euro in imports. China and Argentina follow close by. China has an

11.8% share in Brazil’s total export at 18 Million Euro while Argentina has 8.1% share at 12

Million Euro.


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CHAPTER FOUR

ECONOMIC INDICATORS OF BRAZIL

The two main indicators of a country’s economic stability and situation are its Gross

Domestic Product or GDP and the countries Balance of Payment statement.

4.1 Gross Domestic Product

A country’s Gross Domestic Product is the country’s fundamental measurement

which shows its overall economic yield.

One of the fastest mounting up-and-coming economy worldwide, Brazil’s economy

position itself as the uppermost economy in South American. The country has acquired a

strong position not only among the South American countries but also among global

economies. In 2009, Brazil’s Gross Domestic Product was value at USD 1,543.7 billion and

in accordance with the World Bank, It

comprise 2.60% of the world economy.

The Brazilian economy recovers

from a short lived recession due to the

global crisis and came out of it within

two quarters in 2009. In the third quarter

of 2009, the GDP expanded by 1.3%.

The GDP is expected to grow 5.0% in

2010 and 5.2% in 2011. (EDC,2009).

In the year 2009, Brazils

agricuture sector contributed 6.5% of its

total GDP, while the manufacturing

industry and service sector contributed

23.8% and 67.7% respectively. (CIA –

World Factbook, 2010).


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4.2 Balance of Payments

When Trade takes place between two countries, the transitions involved are recorded

in a statement a financial statement known as Balance of Payments. In international trade a

transaction is the exchange of goods and services between the residents of one country and

other resident’s i.e. individuals, business firms and government bodies from different

countries worldwide.

During 2003 – 2007, Brazil showed a surplus in its current account of the Balance Of

Payments. However it’s in the first half of 2008 was a deficit of 17 USD Million. This

occurred as the increase in imports of goods and services did not correspond by the increase

in exports. (W.T.0, 2009). Being a labor intensive country its primary involved in

manufacturing and agricultural sector thus usually it has a deficit in its Services Balance. Due

to the swift increase in imports compared to the exports, the volume of this deficit has been

getting bigger. Remittance of profits, compensations and other investment income of the

Brazilian economy are linked to foreign investment i.e. outflow of income which exceed the

inflow of income. Thus the Income Balance in Brazil’s Balance Of Payments shows deficits.

(W.T.0, 2009). Overall, the Current Account In Brazil’s Balance Of Payments show a surplus

over the years because of it trade balance which is also been positive, but in 2008 due to the

global crises, the swift increase of imports did not match its export and even though a

positive value in its 2008 Trade Balance, which was a small positive value, led to a deficit in

its Current Account n 2008.

From 2005 to 2008, there was surplus and a steady increase in the Capital and

Financial Account in the Balance Of Payments of Brazil. This surplus was caused but the

increase of Foreign Direct Investment in Brazil which was estimated at 18,822 USD Million,

34,585 USD Million, and 16,702 USD Million in the year 2006. 2007 and 2008 respectively.

The surplus in Brazil’s Current Account during 2003 – 2007 , pooled together with

the surplus in the Capital And Financial Account ever since 2006, has permitted a substantial

buildup of foreign exchange reserves which is estimated at more than 200 USD Billion in

2008. W.T.0, 2009).


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CONCLUSION AND

RECOMMENDATIONS

The latest global crisis of 2007 – 2008 has revealed to the globe a Brazil that is an

emerging and larger economy for the future. Structuring on sound macroeconomic policies

and taking benefit from the international economic surroundings, it is evident that the country

has done its monetary, fiscal and economic homework and changed some important aspects.

The country is one amongst a small number of countries in up-and-coming world market can

who can survive global crisis with no fear about increasing interest rates or implementing

other disaster measures. This clearly shows that even at a slower pace the Brazil is rising and

stirring forward as a powerful future economy.

Speedy weakening of its Current Account Balance will make the country more open

to unfavourable financial conditions. The government requirements to avoid the development

of asset bubbles within its economy. More investment is need in the country in order to bring

about more economic stability and development into Brazil. Thus the Brazilian government

need to make some structural and financial adjustments to bring exporters and investors into

the country. Moreover, Brazil has always been a tourist attraction mainly because of its

events like the carnival and various football game. Hence the country’s government should

promote and develop such event which will promote tourism into the country. Nearly quarter

of Brazil’s land mass is under the Amazon jungle, governmental protection polices to

preserve and conserve wildlife along with nature, will also promote tourism income to the

country.

Being the world fourth largest populated country, Brazil must make use of it manpower

engage in labour intensive sectors like agriculture, machinery, ship building and other good

producing industries. The government should give incentive to promote the development of

these sectors. The country must increase its exports more rapidly than imports in other to

maintain a healthy Trade Balance.

Brazil economy growth is like rags to riches story. And this story will continue as the

country has transformed itself and will continue to do so, from a ‘Cane Basket’ to a ‘BRIC’

(Brick).


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REFERENCES

6.1 Electronic

Brazil Direct, (2006), Brazil Direct - Economic and Political climate [ONLINE] Available at:

http://www.brazildirect.org/economic.html [Accessed 17 March 10].

CIA - The World Factbook, (2008), CIA - The World Factbook - Brazil [ONLINE] Available

at: https://www.cia.gov/library/publications/the-world-factbook/geos/br.html [Accessed 17

March 10].

Edc.ca, (2010), Brazil [ONLINE] Available at: http://www.edc.ca/english/docs/gbrazil_e.pdf

[Accessed 04 March 10].

Encyclopedia of the Nations, (2002), Brazil – Economy, [ONLINE] Available at:

http://www.nationsencyclopedia.com/Americas/Brazil-ECONOMY.html. [Accessed 19

March 10].

Goldman Sachs Global Economics, (2009), BRICs Lead the Global Recovery, BRICs

Monthly, [ONLINE], Issue No: 09/05, Pg 1 – 4, Available at:

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The International Economic Environment of Brazil

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