by Eric Tarosky
Introduction
Brazil is home to the sixth largest economy in terms of nominal GDP (Gross Domestic Product that has not been adjusted for inflation) coming in at $2.223 trillion. This makes its economy the largest Latin America and second largest in the western hemisphere. As of 2011, 8.5% of Brazil’s population fell below the poverty line, and in December of 2013 unemployment registered at 5.4%. In 2012, Brazil enjoyed an estimated budget surplus of $64.8 billion.
History
From the early days of its colonization, well up until the late 1930s, the Brazilian economy was sustained largely through a reliance on the export of “primary products,” or products that directly capitalize on a country’s natural resources. The Portuguese colonized Brazil in the year 1500 and retained colonial status until the year 1815 when it was relabeled as a kingdom of Portugal. During this time the economy was primarily sustained through the production of sugar, gold, and coffee, largely through the utilization of slave labor, which continued until the late 19th century. During these years, Brazil also experienced the largest amount of European immigration of any South American country. It is estimated that between the years of 1882 and 1934, 4.5 million people immigrated to the country.
Modern Day
Present day, natural resources are still a vital part of sustaining the Brazilian economy with a heavy reliance on the nation’s prominent agricultural, mining, manufacturing, and service industries. The country has made great strides forward since 2003 to improve its macroeconomic stability (issues of large-scale concern, such as interest rates or general national productivity) by building up a foreign reserve and minimizing debt by investing in domestically controlled companies. Much like the rest of the world, the nation’s growth was hindered by economic downturn in 2008. However, they were also one of the first country’s to emerge during the recovery. In 2010, the Brazil’s GDP reached 7.5%, the highest point over a 25 year period. Unemployment in the nation is currently at a historic low.
Inequality of income, shown so clearly in this picture of a favela adjacent to a luxury highrise, has been declining steadily for the past 14 years. The opposite is currently true of the United States.
Currency
The Brazilian currency is called the real. It is subdivided into 100 centavos, or “hundredths.” It was introduced in 1994 as part of a monetary system reform package called the “Plano Real” designed to curb rising inflation in the country. At the time, it was hoped the real would have a fixed 1:1 exchange rate with the dollar of the United States. However, the current rate (as of March 2013) is 1.99 real to 1 dollar. Monetary amounts are expressed using a capital “R,” followed by a dollar sign with two vertical lines through it, and then finally the price.
Industries
Agriculture
Brazil is typically divided up into two distinct agricultural regions. The first produces the majority of the nations crops for export, such as grains, oilseeds, and other crops. It has a more temperate climate, more fertile soil, and higher rates of rainfall. Additionally, the region is also benefits from being more technologically advanced, having better maintained infrastructure, and generally more experienced and capable farmers. The other region, located in the northeastern part of the country often suffers from drought and inadequate infrastructure. This region is comprised more largely of subsistence farmers.
Among top agricultural exports from Brazil are oranges (Brazil’s output nearly doubles that of the United States, the world’s second largest producer), bananas, corn, cocoa, beans, and rice. Brazil also has one of the world’s largest livestock populations (at 200 million), and slaughter more cattle annually than even the United States.
Mechanized farming techniques are still largely a rarity in Brazil, particularly in the northeast regions where farmers still rely predominately on manual labor. The region contains over half of Brazil’s farms, but most are extremely small in size covering less than 12 acres. At great expense the Brazilian government has funded large-scale irrigation projects, but these have yielded small returns, as most families in the region were unable to utilize them.
Brazil is also one of the world’s leading producers of ethanol, and their progressive effort since 1975 to substitute the clean-burning alternative for gasoline combustion engines has been one of the most successful in the world.
Mining
Brazil has a wealth of mineral reserves, chiefly iron ore, copper, and tin. There are also large quantities of precious materials such as gold, gemstones, quartz, and several forms of precious clay. Brazil also has extensive offshore reserves of petroleum and natural gas. These are located primarily off the southeastern part of the country.
Manufacturing
Manufacturing is responsible for one-fifth of Brazil’s GDP and one-tenth of their work force employment. The southeastern part of the nation houses the majority of its established industry and employs more than one-fifth of its industrial workers. São Paulo is currently the leading city in terms of production, accounting for almost two-fifths of all manufactured goods. Most manufacturing in Brazil is conducted in smaller factories, usually not employing more than 1,000 employees.
Since the mid-1900s Brazil has also emerged as a leading supplier of automobiles worldwide. Today, it produces close to 2 million vehicles a year. The nation currently also exports a large number of electrical machinery and related products, such as refrigerators, aircraft, etc.
The textile industry began in the early 1800s to capitalize on the large supply of local cotton crops around the eastern state of Bahia. It is not concentrated primarily in São Paulo. The footwear industry also had its beginnings at the turn of the 19th century and remains a large employer of the citizens of Rio Grande do Sul, the southernmost Brazilian state.
Service Industry
The service industry is the most rapidly-developing in Brazil and is also currently the nation’s largest employer, accounting for more than half of its workforce. It is divided up into private and public sector industries. The largest services of the private industry are those related to hospitality (restaurants, hotels, etc.) and various repair-oriented businesses. Retail and personal services are also prominent private industries. Information technology is currently the fastest growing field in Brazil.
The Penn State/ Brazil Connection 