Politics and Economy of Brazil

Brazil is an enormous and diverse country with a long and turbulent history, and an economy that reflects this. With the seventh largest GDP in the world and a population of over 200 million, no discussion of Brazil is without political or economic significance, both for its people and for the world as a whole. As such, inequalities in income (also reflected in geography, race and gender) certainly matter, and must be a key concern for those who promote the development of the country; these gaps mean that poor members of society gain nominally less from growth, although figures show relative gains , an outcome which is undesirable for various economic, social and ethical reasons. Brazil’s development gaps, including its flagrantly high income inequality, but also its deficient infrastructure, political and social problems, have deep but traceable origins in political institutions.

Historically, this includes Brazil’s economic focus on extracting and exporting natural resources supported by slave labor, a system which benefitted the few landowners and created long lasting racial problems. With the waves of immigrants in the 20th century and the beginning of the modern era, economic successes and failures were more policy-related than societal as Brazil’s southeast industrialized. Leaders initiated import-substitution strategies that led to a protectionist and industry-heavy environment (as opposed to an agricultural past), with a relatively high amount of government involvement in the marketplace. In the last 20 years, the results of this past are reflected in modern income inequality that is high and persistent over time. Some examples include regressive public transfers like pensions for senior officials which makes up the major...

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...hese will lay the groundwork for closing Brazil’s gaps in productivity and development statistics. However, the government may also want to consider balancing the factor inputs of its subsidized industries. Businesses must be allowed to capitalize on labor abundance and provide formal employment for Brazil’s working class, rather than incentivized to replace them with expensive capital, subsidized by the government with the highest public debt in South America. Even traditional development theories show us that this is a sustainable way to increase wages in the long term, as has been shown by South Korea and Chile. Though there is no guarantee the same model will work for Brazil, it poses an interesting question about the dynamics of the country’s development from a microeconomic perspective, and suggests a path to industrialization not yet fully embraced by Brazil.