The Federative Republic Of Brazil: Country Analysis

Brazil is the fifth largest country in the world and the largest in Latin America. Its limits are: To the north, Colombia, Venezuela, Guyana, Suriname, and French Guiana; to the south, Uruguay, Argentina, and Paraguay; To the east, the Atlantic Ocean; And to the west, Peru and Bolivia. The capital of Brazil is Brasilia. Brazil occupies almost half of the South American territory. Brazil has borders with all South American countries except Chile and Ecuador. The most important cities in Brazil are São Paulo and Rio de Janeiro. (theapricity.com)

Economic Ailing: Since Rousseff’s reelection, the Brazilian Real has fallen significantly against the U.S. Dollar and the economy is still struggling, despite the record low unemployment. Rousseff’s administration will need to address the stagnant economic growth quickly, which is currently making investors and companies anxious about the short term.

Brazil has become known for its corruption and political scandals. This country is now facing one of its biggest scandals, and still, the laws are protecting those that are being accused from massive corruption and money laundering.

Brazil is a tropical country located in South America with a large population (“The World Factbook: BRAZIL”). According to CIA, the world population is 205, 823, 665 (“The World Factbook: BRAZIL”). With such a large population, the country is filled with a vast array of cultures. Brazil has influences from countries such as Italy, Spain, and Germany (“The World Factbook: BRAZIL”). Although there are so many different cultures influencing the country, Brazil has managed to maintain one major religion overall. According to the CIA, the major religion in Brazil is Roman Catholic, with 64.6% of the population having this as their religion (“The World Factbook: BRAZIL”). Overall, Brazil is a huge country with many different cultural influences.

According to a survey by Transparency International, Brazil ranked 72nd out of 180 countries when it comes to corruption. This is even higher than economies like Turkey, Bulgaria and Cuba (BRAZIL, n.d.).

Brazil still has prominent farming industry, which is not surprising looking at it’s history. In 2012, 25% of exports from Brazil were mineral products, 14% Vegetables and foodstuffs were 13%. Brazil also exports the usual things such as animals and animal products, metals, transportation vehicles, and chemicals among others. 27% of what Brazil imported were Machinery/Electrical Devices, 18% mineral products, 16% chemicals and other related products, and 6% metals to name the few and majority of things. The economy is seeing a decrease in many numbers and scores, none of which seem to be good. Heritage.com’s Index of Economic freedom had dropped the countries overall scores and that corroborates what everybody else is saying about Brazil. Brazil’s economy is not in the best of shapes, or as good as it good

Things have begun to go wrong in Brazil since its President, Dilma Rousseff was elected for a second term in October 2014. After she won her second presidential election, her approval ratings have plunged. “63% of respondents around the country said her government was ‘bad or terrible,’ with only 13% saying it was ‘good or excellent’”. Experts say these numbers reflect the voter’s disappointment in finding out about the corruption scandal with the state-controlled oil company Petrobras and that she may have manipulated Brazil’s account books to hide a growing deficit. Rousseff was head of the board at Petrobras from 2003 to 2010 and most of her opponents said she must have known about the scandal. The investigation showed that Operation Car Wash has put in important figures from President Rousseff’s Workers’ Party but also some of her opponents. The impeachment was based off the claim that she manipulated the government’s accounts when she was seeking re-election.

The city of Brazil has had many crises. In 1894 Brazil had 2 crises a military one and an economical one.

Brazil is one of the fastest emerging economies in the world. Brazil forms part of the BRIC group along with Russia, India, and China. From the 1500’s to the 1930’s, the Brazilian economy relied heavily on the production of primary products for exports. The economy was heavily curbed for three centuries when Portugal implemented an imperial mercantile policy. Brazil gained its independence in 1822. However, Portugal’s influence had a lasting impact for many years to come. Changes started to occur in the late nineteenth century when slavery was abolished and wage labor was adopted. Brazil has a democratic form of government. The center left Worker’s Party has governed Brazil since 2003. The Brazilian economy is composed mainly of the services related industries which contribute to sixty seven percent of the Brazilian GDP and employs seventy percent of Brazil’s one hundred million strong labor force. The industrial and agricultural sector of Brazil together contribute to thirty three percent of the GDP and employ twenty nine percent of the Brazilian employed.

The situation is that the Brazilian government faces a massive internal debt that goes way beyond its earnings in taxes. As a result, Brazil’s unemployment rates are hitting records and inflation have been severe, especially with food prices.

Brazil has always been a volatile economy, and quite a challenge for the Central Bank to manage. In the 90s, Brazil’s currency, heavily discredited due to a high inflation (which almost hit an annual rate of 7,000% in 1990) was anchored to the US dollar, to import credibility, aiming at stabilizing prices. This also indexed prices to the US dollar, causing inflation to rise whenever the US dollar rose. On top of that, Brazil has always had a savings glut which has traditionally been financed by foreign investors. As such, until 2003, whenever there was a global confidence crisis, investors would withdraw funds from Brazil, and the Central Bank would raise interest rates to convince investors to keep their money in Brazil. This dynamic created a vicious cycle, as higher interest rates would cause investments to be more expensive when risk aversion increased, contributing to the volatility of long-term investments in the Brazilian economy.

Before the scandal was reported the unemployment rate hovered around the worldwide average of 4.5%. As a direct result of the collapse of the state run oil giant, unemployment has skyrocketed to disastrous levels. “The massive corruption scandal at Rio de Janeiro-based oil firm Petrobras and its contractors have made matters worse. The government stopped public works projects from oil refineries to São Paulo subways that were contracted out to companies like Odebrecht, OAS and Camargo Correa, to name a few of the civil construction giants caught in the Petrobras graft scheme. That work stoppage led to tens of thousands of layoffs over the last 24 months. Brazilian workers have been paying the price for high-level corruption.” (Rapoza 2016). This economic drought was not confined just to the oil industry, but metastasized like an uncontrolled cancer throughout the entire country.

Slide 3: Brazil is one of the booming BRIC economies, and is very accessible to US markets. The St. Louis Fed provides us with economic data on select international countries. The GDP growth rate in Brazil is declining, and sits at 2.26% right now. The current unemployment rate is 6.03%. This economic strength is fuelling inflation, however. Short-term interest rates are at 11.68% and the inflation rate is 6.7%.

During the 2000s, the economy of Brazil had expanded rapidly because of its consumer boom and commodity exports, making the country the attraction of international markets. Nevertheless, the product growth, together with the rise of inflow of foreign capital, exerted upward pressure on the Brazilian Real. The government introduced capital controls in 2008 to prevent extreme inflow of foreign capital. Dilma Rousseff was elected to minimize the interest rates, increase investment in the country and improve productivity. In the first year of Rousseff presidency, the cost of labor in the country increased swiftly. The failure of increase in productivity growth resulted in the costs of unit labor being pushed upwards. The rise in the relative cost of production in the country led to greater incentive for enterprises to import products rather than purchasing them domestically. At the beginning of 2011, growth in industrial production weakened. In an attempt to improve the economy, the government introduced several stimulus packages to revive industrial production (The Economist,, 2012).

The main producers of soybean are the United States (35%), Brazil (27%), Argentina (19%), China (6%) and India (4%). The beans contain significant amounts of phytic acid, alpha-linolenic acid, and the isoflavonesgenistein and daidzein. In 2011-12 the production of soybean was 70 million tons.