Brazilian Economics Essay, Research Paper

Executive Summary Brazil is a large country with a large population. The natural resources that Brazil possesses are some of the richest in the world. From minerals to timber to manpower, Brazil has all the raw materials to be an economic powerhouse. However, Brazil is being held back from making great industrial strides. The problem for Brazil lies in its inability to move its supplies and products. The roads, although better than they have ever been, are not up to par with other industrial nations. Until Brazil becomes more efficient they will not become an industrial giant. The economic crisis that has hit Brazil threatens to destroy all the progress that has been made in the last decade. Its high rate of inflation must be brought under control for foreign investors to regain confidence. There is much promise in Brazil but its inefficiencies and current economic problems must be overcome for Brazil to take its place among the industrial giants. Introduction The Republic of Brazil is one of the largest countries in the world. Its population of more than one hundred sixty million places it fifth among world population centers. Its wealth of natural resources and ease of entry makes it a valued trading partner and an opportunity for new market growth. Population Brazil is one of the most populous countries in the world. With a population of more than one hundred sixty million people it ranks fifth among world population centers. The population growth rate of Brazil is holding steady around 1.2 percent. The birth rate is 20.4 births/1,000 population, this translates into approximately three million two hundred and sixty-four thousand live births each year. Thirty percent of Brazil s population is under fifteen years of age and sixty-five percent of the population is between fifteen and sixty-four years old. Only five percent of the population is over sixty-five years of age. The ratio of men to women is .98, which is about the same as the global ratio. One feature that has always been present in Brazilian society is migration from one part of the country to another. During the late 20th century the western part of the country has had the highest net influx of population. The Southeast has also received large numbers of migrants, but these have been very unevenly distributed. The most rural southeastern states have had steady reductions of their population through migration. There are three basic racial sources for Brazilian people. To the original inhabitants (Indians) were added successive waves of Europeans (mostly Portuguese) and slaves (mostly Africans). The integration between the Europeans and the Indians began soon after colonization; it was not until the 1600 s that this process also grew to include the newly arrived Africans. A mixture of these three sources makes up the majority of the Brazilian population. This is not to say that there are no other mixes in Brazil. Recently many people of Asian decent (mainly Japanese) have begun to immigrate to Brazil. Members of all nationalities and races immigrate to Brazil every day in search of better things. Economic statistics and activity The GDP for Brazil is around one trillion dollars. This breaks down into the average Brazilian having around $6,300 of purchasing parity. This number is not bad, but it is not as high as the more industrialized countries. This number is expected to grow, but the economic crisis that has seized Brazil will most likely slow this growth. The growth rate is 2.9% which shows that Brazilian industry is growing, just not at an explosive rate. Brazil has an abundance of natural resources, which, with suitable management, could continue to be beneficial for generations to come. Improved transportation has made more of these resources accessible either for export of for use by Brazil s increasing industries and growing population. Brazil is known to contain extremely rich mineral deposits, this includes vast iron ore reserves. Brazil s industries absorb most of its other mineral production. This includes chrome, magnesium, quartz, copper, lead, asbestos, and nickel. Brazil is a major gold and diamond producer, but quantities fluctuate widely from year to year and place to place as deposits are located and exhausted. Brazil is also the largest world supplier of semiprecious stones. These stones include topazes, amethysts, opals, aquamarines, tourmalines, emeralds and others. Brazil has oil and natural gas reserves, which became substantial with the development of offshore fields. The mineral reserves are under constant exploration by government and private sources. Brazil is also rich in biological resources. About two-thirds of the country is under forest, providing about one-seventh of the world s total forest area. Hardwoods predominate in the Amazon and Atlantic coastal zone. Exploitation of the Amazon rainforest, however, has been hampered by the inadequacy of transport facilities. Arable land is not abundant, considering the size of the country. With a coastline of more than 4,600 miles and numerous well-stocked rivers, Brazil has access to substantial fishing grounds. This resource, however, is underdeveloped and productivity is low. For a country as large as Brazil, development of an efficient means of transportation has been a matter of critical importance. Throughout much of its history the nation s different regions remained isolated from each other, but this changed dramatically after World War II, first with the growth of air transport and, two decades later, with the extension of a modern road network. Most passenger and freight traffic moves over the highways, with coastal and inland shipping the next largest mode of transportation. Brazil, like most countries has four major modes of transportation. These modes include railways, highways, waterways, and airports. Except for commuter lines in the major cities, railroads are only of minor importance in Brazil s transportation network, Brazil has only 27,000 km of rail. Few new railways of any significance have been built since World War II, when Rio de Janeiro was linked by rail to Salvador because German submarines were taking a heavy toll on shipping. Most of Brazil s track dates from the 19th century, when the economy was based on exports of raw materials. Brazil has improved its highway system greatly since the end of World War II. During the rainy season surface communications could be interrupted along the major regional links for weeks at a time, stranding motorists in areas with limited housing and food supplies. The construction of Brasilia, the capital of Brazil in 1964, for which many bulky materials had to be airlifted in during the rainy season, alerted the country to the poor state of its roads. When the military assumed power in 1964, the upgrading of the road system became a primary objective. As a result, an excellent system of paved roads now connects all the major points in Brazil, including several links northward into the Amazon region. Brazil has almost two million km of roads, of this one hundred eighty thousand miles are paved. Brazilian coastal shipping was, for many years, in no better condition than its railways. Like the railways, the shipping industry was confined to carrying low-value bulk goods that could tolerate long delays and not infrequent losses. After the federal government launched a shipbuilding program in the 1960 s, however, the tonnage of cargoes increased markedly, and more significantly a larger percentage of higher valued goods was carried. The more significant ocean ports in Brazil are located in Rio de Janeiro, Paranagua, and Recife. The extensive Brazilian river system has a total river navigability of about 27,000 miles. Within the Amazon Basin navigable waterways are the principle means of transportation in northern Brazil, extending into the Spanish speaking countries to the west. The two principle Amazonian ports are connected by a modern, if at times erratic, steamer service are Belem, at the mouth of the river, and Manaus, some 1,000 miles inland. These and lesser ports are important as trade centers for the wide variety of craft that sail the waters of the main rivers and some 1,000 tributaries. As with most countries, airways are extremely important to the Brazilian economy. Brazil has over two thousand five hundred airports, of this one thousand five hundred have paved runways. Every capital and important city in Brazil has a major airport, and most of the smaller cities are serviced by jet aircraft. Few locations are without a least a dirt landing strip. Most of the major cities are also linked by a shuttle service. However, overall flight frequencies and the size of terminals are at a much smaller

scale than at comparable centers in west Europe or North America. This is due to the relatively high cost of fare and competition from inexpensive intercity bus services. Rio de Janeiro and Sao Paulo handle most of the international air traffic. Numerous airlines flourished in Brazil at one time or another, but they have been consolidated into three major ones that compete nationwide. Brazil has three major communication systems; telephones, radios, and television. There are over seventeen million telephones in Brazil. The Brazilian telephone system is fairly efficient as long as one remains close to a city. As the distance from a city increases, the number of phones and the reliability of service tends to drop. As one might expect there are no conventional phone lines in the deep Amazonian jungle. Radio broadcast stations are very important in Brazil. Brazilians own seventy-five million radios, and use them to listen to almost one thousand five hundred AM radio stations. Radios are cheaper than television sets so more Brazilians can afford them. Television is a major industry in Brazil. One hundred twenty stations can be found on Brazilian TV. This makes Brazil the fourth largest television broadcasting system in the world, reaching an estimated forty million Brazilians who own televisions. Foreign companies have been investing in Brazil for years. Because of its large population and plentiful natural resources, Brazil is very attractive to companies looking to expand into new markets. Large companies form Coca-Cola and Pepsi to Wal-Mart and Kentucky Fried Chicken have invested millions of dollars in order to gain a foothold in Brazil. One reason for the large number of companies with interests in Brazil is ease of entry. There are few barriers to entry in Brazil and the government encourages foreign investment. With Brazil s increasing population it can expect the foreign influx to continue for many years to come. Brazil exports about fifty billion dollars worth of products every year. The largest importer of Brazilian goods is the European Union (26%), followed by the United States (23%), Latin America (22%), and Argentina (11%). Brazil is the world s leading exporter of coffee, which is its most important single export. Most Americans think of Columbia as being the biggest producer of coffee, but Brazil produces almost twice as much as Columbia. Brazil is also a prominent producer of minerals. Brazil is one of the largest producers of iron ore in the world, and thanks to new mining techniques and technology this trend is expected to continue. Brazil also exports soybeans, tropical fruits, footwear, and sugarcane. Brazil is also the world leader in the production of semiprecious stones, gold and diamonds. Brazil imports about fifty-five billion dollars worth of goods every year. Crude oil is one of the major imports that Brazil receives regularly. In order to lessen its dependence on gasoline, the Brazilian government decided to run the country s vehicles on something a little less pricey, sugar. The government planned to replace gasoline with ethanol (ethyl alcohol). Processing the sugarcane in modern plants became the most successful such program in the world. For a number of years, virtually all new automobiles in Brazil have been engineered to run on this fuel. Brazil also imports other products that it is lacking at home. These products include capital goods for industry, chemical products, foodstuffs, and coal. Brazil has had a trade deficit for almost its entire history. There are many reasons for this but the main reason is a lack of ability to get to its resources. Brazil is a country with huge amounts of natural resources, but they are hard to get to. New roads and shipping channels have helped open up some more of Brazil s resources, but more must be done if Brazil ever expects to have a trade surplus. One thing that has been beneficial to Brazil is the influx of new business from outside the country that helps Brazil s ability to export more products. Unfortunately for Brazil its economy has recently taken a downturn. The inflation has gone through the roof and there has been a leveling off of foreign investment. The World Bank and the United States recently formulated a bailout plan for Brazil. This bailout included loans and other economic aid. The reason for the bailout lies in the belief that South America goes as Brazil goes; if Brazil encounters a recession than so will the rest of South America. A South American economic crisis combine with the one that has hit Asia would mean an almost certain worldwide recession. Brazil s labor force is a relatively strong one. Sixty-one million people are included in Brazil s work force, and this number is increasing every year. Forty-two percent of the work force is employed in services, while thirty-one percent work in agriculture, and twenty-seven percent work in industrial occupations. The unemployment rate is not large, but it is growing. Six percent of the Brazilian population is unemployed and the number is increasing with the recent economic crisis. Developments in science and technology With the help of foreign investors, Brazil is quickly increasing its technological capabilities. With the influx of new businesses from other countries, better technology became essential. These companies came into Brazil and trained their new Brazilian employees in the use of state of the art equipment. Advances were also made in the mining and extraction fields which were put to good use in Brazil. These advances will make it possible for Brazil to get back on its feet and compete in the global marketplace once the inflation is curtailed. Another reason for the growth of Brazilian technology is the educational system. More and more students are learning to use computers and at a younger age. There can only be benefits for Brazil in the long run if this trend continues. Channels of Distribution Brazil s businesses work in much the same way as they do in the United States. The retailers come in all shapes and sizes, from small family stores to multinational chains like Wal-Mart. Items are mainly purchased through cash transactions but buying through credit is also done. There seems to be less of a reliance on credit cards than the United States. The penetration of urban centers is high for the simple reason that there are more people able to buy products in urban areas. In rural areas it is more likely to see a small family store than a large outlet because there are simply not enough people to support a larger store. Media Brazil is a large country with a large population and therefore has many sources of media available to the public. Television, radio, and print media are all found in Brazil. Brazil s major newspapers are published in the cities of Sao Paulo, and Rio de Janeiro, but numerous others are published in the smaller cities and towns. There are also a number of weekly magazines that cover subjects from news to hobbies. Press and broadcasting are intimately linked in Brazil, including television s TV Manchete and the TV Globo, which, with Radio Globo, is the largest and most influential of the county s broadcasting media. There are also several lesser networks in radio and television as well as a large number of regional and local stations. An educational channel broadcasts to a limited number of cities. Common television fare includes the tremendously popular prime-time novelas (soap operas), sporting events, news, special reports, foreign movies dubbed into Portuguese, and children s programming. In many ways television, in conjunction with massive urban migration, has furthered the homogenization of Brazilian culture and the modification of regional differences. When the Brazilian government as run by its military many of the stations were owned by the state. This is not the case today. Today television and radio stations operate in much the same manner as they do in the United States. Commercials are paid for by companies wishing to advertise in a form of media and are played. The only noticeable difference would be the amount of nudity on regular stations at all hours of the day. Bibliography Britanica Online. Brazil: Physical and Human Geography. http://www.eb.com:180/cgi-bin/g?DocF=macro/5000/84/24.html October 29, 1998. Brazilian Embassy, London. Brazil in Brief. http://www.brazil.org.uk. Oct 19, 1998. Brazilian Embassy, Washington DC. The Brazilian People. http://brasil.emb.nw.dc.us/bzpeople.htm. October 24, 1998. CIA Factbook. Brazil. http://www.odci.gov/cia/publications/factbook/br.html October 29,1998. Eletronic Library. Brazil. http://www.encyclopedia.com, October19, 1998. Republica Federativa de Brasil. The Wonders of Brazil. http://psg.com/walter/brasil.htm. October 24, 1998. [Home] [Brazil] [Economic Paper] [cultural paper] [marketing]