Page 29 - InvestmentGuideBrasilEng

BRAZILIAN ECONOMIC AN INDUSTRIAL AND BRAZIL: STRONG AND POSITIVE BUSINESS

DEVELOPMENT: A RESOURCE POWERHOUSE STABLE ENVIRONMENT

HISTORICAL PERSPECTIVE Brazil is a market of superlatives. It is the world’s The ongoing crisis in advanced economies high- Brazil is an open economy, in particular when it

fifth-largest country by population and landmass, lights just how far Brazil has come since the lost comes to foreign direct investment. Many of the
st
21 -century Brazil is very different from the Bra- the world’s seventh-largest economy by nominal decade of the 1980s. Since then, Brazil has seen largest companies operating in Brazil today are a
zil of the 1980s, when the country was buffeted GDP (and also when measured on a purchas- its average GDP growth rate increase every ten product of foreign direct investment. This is the
by a series of international debt crises. Thanks to ing power parity basis) and the second-largest years, from less than 2% in the 1980s to 2.7% per case, for example, in the automotive sector and
the country’s large and growing domestic mar- emerging market in the world after China by both year over the decade from 1991 to 2001, to almost in many other consumer segments. Internation-
ket and high degree of diversification, Brazil has market size and total GDP. 4% over the ten years from 2002 through 2012. At al investors in Brazil today benefit from strong
since consolidated macroeconomic stability, be- Brazil is a leading global player in a broad a time when advanced economies are facing poor market fundamentals, a supportive investment
come a net external creditor in 2010 by paying range of economic sectors. growth prospects relative to past performance, framework, a modern and efficient financial sys-
off its debt to the International Monetary Fund, In advanced manufacturing, Brazil is proud to Brazil stands out for its solid fundamentals and tem and a word-class workforce.
reduced net debt-to-GDP ratio to an historic low host multinational original equipment manufac- positive long-term prospects.
of 35% and accumulated international reserves turers, as well as homegrown talent, in aerospace,
totaling $380 billion. automotive, capital goods, chemicals, construc- ECONOMIC LIBERALIZATION
At the same time, conditional cash transfer tion, electronics, engineering, information and
programs to families, such as the internationally communications technologies, life sciences and oil AND REFORMS
known Bolsa Familia (“Family Grant”), have lifted 40 and gas. Brazil is also home to world-class service
million Brazilians out of poverty and into an emerg- industries, including construction, engineering
ing middle class. Currently this income bracket, and financial and professional business services. Brazil’s financial stability and economic strength
referred to as the “C Class” in Brazil, represents Commodities continue to play an important stems from reforms made during the 1980s and
55% of Brazil’s total population and is expected to role in Brazil’s economic emergence and have 1990s that opened Brazil to international trade
grow from 105 million in 2011 to 118 million in 2014. done so ever since European settlers first arrived and liberalized key sectors of the economy by re-
Combined with a positive demographic outlook in Brazil, with the country’s name likely deriving moving government monopolies and fostering
through 2020 and supported by improved access from a commodity – a lustrous red timber called competition. In 1994, after several frustrated at-
to consumer credit, Brazil’s domestic market is set brasilwood. Agricultural advances over the past tempts to bring down inflation, the Brazilian gov-
to continue to grow into the future. twenty years have seen Brazil emerge as one of ernment introduced the “Real Plan,” a successful
the most vitally important food producers in the stabilization program that introduced the curren-
world. Today, Brazil is among the top producers cy that Brazil uses today – the real (plural: reais).
and exporters of a wide range of commodities, in- The Real Plan managed to achieve a sustained
cluding biofuels (ethanol and biodiesel), iron ore, reduction in prices, ending three decades of hy-
soybeans, coffee, oranges, poultry, beef, pork, perinflation in Brazil. Since that time, prices have
aluminum and forest products. remained stable. The Real Plan made ambitious
Recent oil and gas discoveries – the largest structural reforms that gave Brazil what is known
find in the last 30 years in the Americas – as well as its macroeconomic “tripod” of stability – infla-
as abundant renewable energy resources, includ- tion targeting, commitment to a free-floating ex-
ing hydro, wind and solar power, all contribute to change rate and prudent management of public
increasing Brazil’s status as a major international finances. This tripod, adopted in 1994 and man-
th
energy player, currently holding the 10 -largest oil aged by an autonomous Central Bank and the
reserves on the planet. Brazilian government, has remained at the heart
of Brazil’s macroeconomic policy framework ever
since, irrespective of changes in government.
One of the main consequences of ending in-
flation was an improvement in income distribu-
tion. The restoration of the value of the curren-
cy and the return to economic growth brought
about an increase in the purchasing power of the
less privileged members of the population and a
significant reduction in poverty.

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