BRAZIL ECONOMY
Brazil’s economy mainly supported by well-developed agricultural, mining, manufacturing, and service sectors. Brazil's economy overshadows that of all other South American countries, and Brazil is expanding its presence in world markets. Since 2003, Brazil has shown steady improvement upon macroeconomic factors, increased foreign reserves, and reduced its debt profile by shifting its debt burden towards domestically held instruments.
After strong growth in 2007 and 2008, Brazil was no exception to hit by global financial crisis in 2008. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports declined. However, Brazil had shown the signs of recovery as the first emerging market. In 2010, following the growing consumer and investor confidence, GDP growth rate reached 7.5%, the highest growth rate in the past 25 years. Due to high interest rates, Brazil is an attractive destination for foreign investors.
Due to high capital inflow the currency appreciated and it hurt the Brazilian manufacturing sector which forced the government to intervene in foreign exchange market and raise taxes on foreign capital. President Dilma ROUSSEFF has retained the previous administration's commitment to inflation targeting by the central bank, a floating exchange rate, and fiscal restraint. The administration implemented more expansionary monetary policy in 2012 to boost the economic growth, however, the effort failed to stimulate the growth as expected.
Brazil adopted inflation targeting 1999, just after the adoption of floating rate exchange system. In such regime monetary policies directly influences the household lending rate, firms financing costs and exchange rates.
Monetary Policy
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...xample, if government increases its purchases but keeps taxes constant, it increases demand directly. On the other hand, if the government cuts taxes, households’ disposable income rises, and people will spend more on consumption. This rise in consumption will in turn raise aggregate demand.
Fiscal policy also changes the composition of aggregate demand. When the government runs a deficit, it issues bonds to meet some of its expenses. In this process, it discourages the private investments. Keeping other things constant, a fiscal expansion will raise interest rates and move out some private investments, thus reducing the net output.
In an open economy such as Brazil, fiscal policy also affects exchange rates. In fiscal expansion, the interest rates rise due to government borrowing, which attracts foreign investors and thus exchange rate appreciates in short run.
Today, Brazil with a GDP of $2.533 trillion is the 7th largest economy in the world and it is also considered as one of the most successful emerging countries. Despite all predictions, thanks to its huge domestic market and agriculture, the country maintained its growth in 2009 and 2010.
Have you ever taken a look at a South American map? Well if you have, you probably have seen how large Brazil is compared to all the the other countries associated on the map. Brazil is a Portuguese speaking country with a population of more that 200 million people and an area nearly equal to the United States! Knowing that Brazil has that big of a population probably makes you assume that Brazil is a wealthy country. Although Brazil may seem pretty wealthy at first, looking at a regional or a local scale might change your mind on how wealthy Brazil really is. A scale is used by geographers to understand situations such as the wealth of a nation. How can scale help us understand whether Brazil is a wealthy country? Well, Brazil may seem wealthy on a national scale, but examining Brazil at regional and local scales show a different picture.
Brazil is the largest economy in South America. Under the leadership of former president Henrique Cardoso in the 1990's, the country's macro economic situation stabilized significantly. As the new millennium began, the leadership of president Cardoso's successor, former president Lula da Silva saw the country's economy accelerate significantly such that the Lehman scandal effect failed to significantly affect its growth (The Economist). Brazil economy reported an economic growth rate of more than seven percent in 2010 which is considered as its best performance in 25 years. This trend saw the country awarded the lucrative rights to host this year's FIFA World Cup Finals. However, this has changes dramatically after former president Lula da Siva convinced Brazilian voters to elect Dilma Rousseff as their next president (The Economist). Currently, the country' macro economic status is in turmoil with economic growth in 2012 reported to have been at less than 1%. This essay seeks to analyze the contemporary macro economic conditions in Brazil and present a commentary on the...
Brazil, the largest country on the continent of South America, has historically been seen as the underdog socially, politically, and especially economically. Referred to as “the country of the future… and always will be” by many Brazilians and those who know the country best, the country has not always been a beacon of hope for Latin America as it is today (Weyland, pg 64). Brazil has many unique qualities when compared to many of its Latin American counterparts. While much of Latin America has wrestled with its Spanish colonial past, Brazil has been much more diplomatic and tolerant of its Portuguese colonial past. With such a vast amount of natural resources and territory, Brazil has had the advantage of being relatively self-sufficient when it needed to, but also being able to develop into one of the busiest and prosperous trading nations in Latin America. With frequent political transitions throughout its 500 year history, and experiencing periods of oppression and totalitarianism, Brazil has managed to overcome and move past the scars of its dictatorial past. This is in part due to its fortunate avoidance of ruthless and violent dictators in the style of Pinochet in Chile, Peron in Argentina, Castro in Cuba, and Fujimori in Peru, just to name a few. In this research paper, I will briefly describe an overview of Brazil’s present political circumstances while also touching on a few key factors that have aided its development, in addition to in-depth analyses of the country’s history through three main phases. I will also make philosophical connections to explain and put into proper perspective the events that have shaped Brazil into the country it is today.
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
Currently the policy is expansionary. This involves increasing AD, therefore the government will increase spending and cut taxes. Lower taxes will increase consumers spending because they have more disposable income. This will worsen the govt budget deficit.
Conclusion: Brazil with the rest of the BRIC nations have a long way to go before their current economic development translates into benefits for the majority of the population. Fortunately, Brazil has great strengths. Thanks to its efficient and entrepreneurial farmers, it is the world’s third-biggest food exporter. Even if the government has made the process slower and costlier than it needed to be, Brazil will be a big oil exporter by 2020. It has several manufacturing jewels, and is developing a world-class research base in biotechnology, genetic sciences and deep-sea oil and gas technology. The consumer brands that have grown along with the country’s expanding middle class are ready to go abroad. Despite the recent protests, it does not have the social or ethnic divisions that blight other emerging economies, such as India or Turkey.
Globalisation has been crucial to the economic and social development of Brazil. In the late twentieth century Brazil face years of economic, political and social instability experiencing high inflation, high income inequality and rapidly growing poverty. However after a change of government in the 1990s and large structural changes in both the economic and social landscapes, the brazilian economy has been experiencing a growing middle class and reduced income gap. Since the start of the 21st century, brazil has benefitted from the move to a more global economy.
Brazil's economy has a lot of potential. Throughout Brazilian economic history, the government has had an economic policy based on import substitution and it was also trying to switch from agriculture to industry. To insentivate domestic industry, the government established protective tariffs and import quotas. Most of the enterprises were owned by State such as: steel, oil, infrastructure, and others. These firms also received subsidize "long-term credit expand." For these reasons it had been difficult to establish ventures in Brazil.
Before 1930, the Brazilian economy was dominated by a number of agricultural and mineral products for export. The world economic depression of the 1930s encouraged the government to diversify the economy, particularly through industrialization. Consequently, the importance of agriculture and mining has fallen significantly. A major objective of Brazil's industrialization policy was to replace imported manufactures with Brazilian-made ones. It is now able to export goods such as iron ore, soybeans, footwear, and coffee. Its imports include machinery and equipment, chemical products, oil, and electricity.
In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).
Brazil is both the largest and most populous country in South America. It is the 5th largest country worldwide in terms of both area (more than 8.5 Mio. km2 ) and habitants (appr. 190 million). The largest city is Sao Paulo which is simultaneously the country's capital; official language is Portuguese. According to the WorldBank classification for countries, Brazil - with a GDP of 1,5 bn. US $ in 2005 and a per capita GPD of appr. 8.500 US - can be considered as an upper middle income country and therefore classified as an industrializing country, aligned with the classification as one of the big emerging markets (BEM) next to Argentina and Mexico. Per capita income is constantly increasing as well as literacy rate (current illiteracy rate 8%). Due to its high population rate (large labour pool), its vast natural resources and its geographical position in the centre of South America, it bears enormous growth potential in the near future. Aligned with an increasing currency stability, international companies have heavily invested in Brazil during the past decade. According to CIA World Factbook, Brazil has the 11th largest PPP in 2004 worldwide and today has a well established middle income economy with wide variations in levels of development. Thus, today Brazil is South America's leading economic power and a regional leader.
Brazil is a diverse and enormous country. There are large, medium and small sized aities that stretch from coast. From Brazilian cit...
In the case of Brazil, nowadays this is one of the most attractive markets in the world, recently Brazil has experienced strong economic growth; analysts argue with Russia, China and India (BRIC) Brazil will be the largest and most influential economies in near future. Notwithstanding, the promissory economic future, investment in Brazil has some threats and risks that should be taking into account: exist some grade of cultural difference between both countries that could affect the profitability of investment; however this will be a good option to invest in brazil, the suggestion is focus in most important cities ( Rio and Sao Paulo).
An increase in government spending or a reduction in net taxes is always aimed at increasing aggregate output (Y). The main aim is to stimulate the economy but this may lead to many problem such as inflations, budget deficit because of needed debt to finance the deficit. Before finding out which is the better options for stimulation of any economy we need to first be clear with the concept of multiplier.