Brazil country overview

The economy of Brazil

Geography, People, Culture, and Economic Profile

Brazil information index

The economy of Brazil

Brazil stands as a formidable force in the realms of mining, agriculture, and manufacturing, complemented by a robust and swiftly expanding service industry. The nation is a prominent supplier of numerous minerals, such as iron ore, tin, bauxite, manganese, gold, quartz, as well as diamonds and other precious stones. It is also a significant exporter of steel, automobiles, electronics, and a variety of consumer products. As the primary global supplier of coffee, oranges, and cassava, and a key producer of sugar, soybeans, and beef, Brazil’s agricultural sector, despite its historical significance, has seen a gradual decline in its relative importance since the mid-20th century. This shift occurred as Brazil began to focus on urbanization and the development of its mineral wealth, industrial capabilities, and hydroelectric resources. São Paulo, in particular, has emerged as a major hub for industrial and commercial activities on the global stage.

The economic narrative of Brazil has been marked by a series of booms and busts, with a heavy reliance on one or two principal agricultural commodities that experienced volatile price shifts in the international market. This pattern commenced with the export of brazilwood during the early colonial period and was followed by surges in sugar, minerals in the 18th century (notably gold and diamonds), coffee in the mid-19th century, and rubber in the late 19th and early 20th centuries. In an effort to diversify the nation’s economic output and reduce the dependence on agricultural exports, the Brazilian government of the 20th century actively promoted the manufacturing sector.

In response to the Great Depression of the 1930s, the government adopted a series of nationalistic strategies aimed at ensuring domestic control over critical industries. This involved taking ownership stakes in some of the largest national companies, often in collaboration with local or international partners, and later offering shares to private investors. While the government’s increasing role in the industrial sector faced criticism for prioritizing political and social goals over economic efficiency and for its unwieldy bureaucracy, certain industries acknowledged the positive impact of government interventions. These included direct investments, fiscal incentives, protective tariffs, and import limitations. The government was instrumental in initiating several pivotal industries, such as a modern shipbuilding initiative, the expansive petrochemical sector led by Petrobrás (established in 1953), an emerging microelectronics and personal computer market, and the aircraft manufacturing industry spearheaded by Embraer. This included the production of commercial jetliners, aviation and surveillance equipment, and military aircraft for the Brazilian air force. Additionally, the government facilitated the establishment of a domestic motor vehicle industry in the 1950s, which aimed to supplant imports and assembly operations from the United States and Germany. For a time in the late 20th century, manufacturing represented the largest portion of Brazil’s gross domestic product (GDP), before being surpassed by the service sector.

Almost continuously high rates of inflation in the late 20th century affected every aspect of Brazil’s economic life. Inflation came in part from the government’s policies of deficit spending, heavily financing industrial expansion, and subsidizing business loans, as well as the practice among individual Brazilians of obtaining loans from foreign banks when domestic credit was restricted. In the latter part of the 20th century, Brazil indexed nearly all transactions for inflation, according to the constantly corrected value of the government’s bonds. This practice virtually institutionalized inflation and led to public acceptance of its inevitability. As a result, Brazil’s anti-inflation programs were only fleetingly successful until the mid-1990s, when the government initiated the Real Plan (Plano Real), a program that strictly limited government spending, introduced a new currency, and made other fiscal reforms.

The government privatized dozens of financial institutions, manufacturers, and mining companies in the 1990s, including several major steel producers and the Rio Doce Valley Company (Companhia Vale do Rio Dôce; CVRD). The CVRD, Brazil’s giant mining and shipping conglomerate, was apportioned into separate (but still economically formidable) mining and shipping units. The government also sold a minority of its Petrobrás shares to private investors and partially opened the petroleum industry to competition. Additional public offerings of Petrobrás shares followed—in 2010, notably, the company raised about $70 billion in the world’s largest share offering to date—but the government retained its majority ownership.

At the beginning of the 21st century, serious problems marked the Brazilian economy, aggravated by political uncertainties. Inflation, financial instability, and unemployment (or underemployment) remained constant threats, and political and financial scandals periodically erupted throughout the country. However, by mid-2004 the inflation rate had decreased, and for the first time Brazil issued bonds in its own currency, the real, instead of the dollar. Brazil still has one of the world’s most lopsided distributions of wealth: 10 percent of the people received nearly half of the country’s income, whereas the poorest 40 percent of the population brought in less than one-tenth of the total. In addition, patterns of landownership continued to be grossly uneven, as they were in colonial times, and social movements agitated for reforms.

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