Brazil Economy

To understand the unique Brazil economy, it is helpful to look at the history of the country and the reasons why the economy developed as it did.

Brazil commands the 5th largest geographical area of any country in the world and is the largest country within the continent of South America. Within Brazil reside 190 to 200 million people, the majority of whom are poverty stricken and illiterate.

Brazil Economy - Major Industries

• Brazil holds 8th place worldwide for GDP - Gross Domestic Product
• Average GDP growth for Brazil overall is 5% - most of that is for the very rich
• Brazil exports 25% of the world's supply of refined and raw sugar products
• 80% of the orange juice produced worldwide comes from Brazil
• Brazil leads the world in soybean production and export
• Brazil also sells significant amounts of chicken and beef to other parts of the world
• They are the 5th largest producer of cellulose in the world

The Brazil economy reflects the diversity of the country and their people when you look at the other markets into which Brazil has invested: banking, wheat, footwear, coffee, diamonds, aircraft, mineral resources and mining, petrochemicals, cattle, computers, and automobiles.

In recent times the Brazilian economy has been growing even while other nations are still in the grips of a worldwide recession. Brazil has been expanding their overseas investments and moving into a new era of economic visibility on the world stage.

What is the GDP or Gross Domestic Product for Brazil?

What is the GDP? It is the total amount, in U.S. dollars; of the services and goods a country produces. The economic health of any country is determined first and foremost by its GDP.

The gross domestic product influences the way businesses conduct purchases and hiring, government spending, and even influences retail sales. Translating the GDP, or purchasing power, of the Brazil economy into U.S. dollars comes to about 2 trillion.

Brazil's GDP

• Service industry - 67%
• Industrial - 30%
• Agriculture - 4%

How Has Brazil Economy Evolved?

The first settlers to Brazil were a diverse group from many different countries. Millions of slaves from Africa were brought to Brazil to work for the elite until 1888 when slavery was finally abolished.

At that time, land was held firmly by the rich or elite of the country, leaving no land to the slaves or poorer people. Those who could go went to the bigger cities of Brazil looking for work and opportunities.

The ones left behind learned to live on public land and built favelas, or slum cities in which to reside. The poor people of Brazil were mostly illiterate then and still are much that way today.

Over the years, Brazil has seen an increase in several areas of industry, but the economic gap between the rich and the poor of Brazil is still huge.

Brazil Economy - Rampant Inflation

In the latter half of the 20th century, Brazil developed rampant inflation, that began in the 1950's when the government printed money to fund the new capital of Brazil, Brasilia.

By the 1980's, inflation was completely out of control, at times as high as 80% a month!

The government would make unsuccessful attempts to freeze prices or even bank accounts. Each administration failed, and Brazilians became less and less trusting of their government and their currency.

Imagine going to the supermarket and seeing the prices change every day, and climbing up so high that within a month you couldn't afford a loaf of bread!!

I experienced this first hand when I was there. Each time I went to trocar dineiro or change my U.S. dollars into Cruzeiros, the amounts would be different!

People felt the government could not control inflation and the prices were meaningless. They felt their currency had no value.

In 1992 the government was completely desperate and tried a very unique method to control inflation by slowing down the creation of money, and also boosting faith in the value of their currency.

They created a new virtual currency called the "URV", or unit of real value which was kept stable, even while inflation in the rest of the country was still out of control.

The URV didn't actually exist, and people still used their usual currency of Cruzeiros ... but all prices, taxes and currency amounts were listed in URV's.

This idea was designed to help people to think differently about their money.

By "thinking" in URV's rather than in the rapidly changing Cruzeiros, people began to experience a stable currency, and the hope was that people would stop expecting prices to go up.

On July 1, 1994 the Brazilian government phased out their old, inflating currency and created the Real. The transition took less than 6 months.

The Brazilian Economy of Today

In recent times, 20 million Brazilians have risen out of poverty and Brazil became a major exporter. Several Brazilian banks are among the top ten issuers of credit cards worldwide.

Brazilians now have the option to finance their purchases with installment plans. Since Lula's election in 2002, Brazil has seen some growth in their GDP.

Inequalities in the Brazil Economy

Still, the economy has a ways to go. Despite many significant and groundbreaking efforts by Brazil's most recent President, affectionately called Lula, poverty is still widespread in Brazil, and there is still quite a large gap between rich and poor.

Some say that wealth inequality has increased since Brazil's economy began to grow, however others say that this gap is lessening.

Wealth redistribution programs such as Fome Zero and Bolsa Familia have helped to bring relief to many in poverty, and to help them to create a more prosperous life with incentive programs, however there are still many challenges to be overcome.

Brazil has made a concerted effort to invest half of their education budget toward elementary schools and high schools. The other half was put toward colleges and universities.

The result? Brazil offers world-renowned universities to those who can afford them. Yet, 80% of the workers in Brazil remain illiterate and don't even have a high school diploma.

Imagine the frustration of a manager or executive who is trying to run a business with workers who cannot understand the instructions given to them. It is frustrating and demeaning for the workers as well.

Today, the Brazil economy is still severely unequal. The rich of Brazil make 23 times more money than the poor of the country. The land of Brazil is held and controlled by less than 2% of the country's population.

Visiting Brazil, it isn't unusual to see a millionaire's mansion built right next to a favela, or slum, with a wall between them so the rich don't have to see the poor living in below poverty conditions.

Brazil Economy - Land Distribution and Illiteracy

Brazil's economy cannot be truly healthy until the issue of illiteracy and land ownership is addressed.

If a more equal distribution of land resources could be made available to those less fortunate than Brazil's elite, this would allow Brazil to benefit from the enormously abundant resources of creativity and innovation that her people have.

The basic skill of reading and education could be made available to all, regardless of their social status. When this happens, the financial and social gap between the rich and the poor of Brazil can truly be bridged.

The economy of Brazil and her people would naturally see a boost as a result of more people being empowered with the knowledge and resources to make their own unique contributions to the world.