Brazil’s Economy in the First Quarter of 2019
Brazil has one of the highest levels of inequality in the world. The disparity between rich and poor is huge, with 10% of the country living in poverty. In spite of its recent economic growth, the country is still suffering from social issues. Inequality continues to blight Brazilian society, with the richest 5% enjoying the same income as the poorest 95%.
Brazil’s economic growth
Brazil’s economic growth accelerated in the first quarter of 2019. The impact of the COVID-19 pandemic has eased, and consumer spending and services activity has increased. GDP growth was 1.0% in the first quarter of 2019, slightly below the 1.2% expected in a Reuters survey of economists. However, upward revisions to previous economic data showed that growth had begun to pick up earlier than anticipated. This was partly due to widespread vaccination, which softened the impact of the pandemic and eased restrictions on activity.
Brazilian policymakers responded by boosting public spending, raising the minimum wage and forcing state-run banks to increase lending. They also cut sales taxes and lowered the price of gasoline and food. However, price controls reduced consumer purchasing power, and they affected the profitability of state-run oil and gas companies, particularly Petrobras and the country’s ethanol industry. As a result, business leaders curtailed investment. In addition, problems in government auctions exacerbated the situation.
In addition, Brazilian growth was characterized by low levels of total factor productivity, which limit structural change. However, recent economic performance was driven by a high proportion of productivity in the services sector and growing agriculture. Moreover, large dispersion in the country’s productivity suggests that markets are poorly functioning and that competition is limited, and that substantial misallocation of labor and capital has occurred. To reverse this trend, reforms in these sectors are necessary.
However, Brazil’s economy still faces several challenges. It will host the World Cup in 2014 and the Olympics in 2016, which will require significant infrastructure investments. The current investment rate in Brazil has been low, varying between eighteen and twenty percent of GDP. This is significantly lower than the rate in Asian countries, which invest 35 percent of GDP or more.
The country’s services sector has grown into the country’s largest sector, accounting for almost 65% of the country’s GDP. The decline in industry and agriculture has reduced their share, and the service sector has contributed more than 50% since the 1990s. The service sector is now a mature industry in Brazil, encompassing retail sales, personal services, and financial services.
Brazil’s agricultural sector
The agricultural sector is a key pillar of the Brazilian economy, contributing around 25 percent of the country’s GDP. Brazil is the world’s fourth largest food producer and ranks among the top five in corn, soybeans, and sugarcane production. But the country also faces serious environmental problems. For instance, deforestation is less than one fifth of its level in 2004, and only about 22.5 percent of municipalities engage in organic farming.
Brazilian agriculture underwent major changes in the early 1980s, largely in response to the industrialization process in the country, which was facilitated by a strong demand for agricultural products. This period was also marked by the growth of the population and rapid urbanization. These developments helped boost the agricultural sector, but also resulted in a deterioration of the distribution of income.
In terms of exports, Brazil’s agricultural sector contributed about 23 percent of the country’s total GDP between 2002 and 2011. Despite a slowing global economy, Brazil still imports more agricultural products than it exports. The country’s growing population and per capita income are driving demand for agricultural products. Furthermore, the country’s port system is overburdened with cargo.
Brazilian agriculture has experienced significant growth over the past 20 years. The country’s land mass has helped it become a competitive supplier of soy and corn. As a result, Brazil’s soybean exports have tripled and boosted its share in the global soybean market.
Brazil’s agricultural sector has great potential for exporting tropical fruits, but it is constrained by restrictions imposed by Japan and the United States. This is largely due to the presence of the fruit fly, which requires costly procedures to meet strict standards in foreign markets. In addition, such procedures also increase the costs of production.
The economic crisis in Brazil has weakened efforts to reduce poverty. According to recent statistics, the number of poor people has increased by 2 million in the last two years.
Brazil’s trade surpluses
Brazilian trade surpluses have recently hit record highs. In 2017, they topped USD 61 billion. They are expected to reach another record high this year. Sharp increases in commodity prices and a depreciation of the real have boosted the results. The partial recovery in the global economy has also helped Brazil’s exports. In the near term, high commodity prices will continue to drive Brazil’s trade surplus. In the longer run, however, the country’s dependence on Chinese imports will pose trade and economic challenges. In the meantime, however, Brazil’s trade surplus will continue to be driven by domestic initiatives and the international context.
Despite the weak global economy, Brazil’s current account is still well-anchored. However, the country’s capital account is facing pressure due to weak global economic conditions. The weak real has prompted Brazilian companies to repatriate more of their profits. It has also led to a decline in foreign direct investment.
Despite Brazil’s trade surpluses with the United States, the two nations continue to engage on trade matters. The countries signed an Agreement on Trade and Economic Cooperation in 2011, which aims to increase cooperation between their economies and address mutual trade concerns. In 2019, the U.S. trade with Brazil reached $105.1 billion in goods and services and a $29.8 billion trade surplus.
Brazil’s exports grew at a compound annual rate of 17.2% from 1963 to 1981 and a further 8.2% from 1982 to 1985. Coffee, which has long been the country’s main export, saw its share of exports fall from 41.3% in 1968 to 3.2% by 2000. During the same period, the country implemented ambitious energy development plans, reducing Brazil’s dependence on foreign oil.
Despite this high growth, Brazil’s economy experienced high inflation. The annual rate of inflation jumped from 34 percent in 1973 to 210 percent by 1978. The country’s monetary policies failed to combat this inflation. Inflation became a serious bottleneck and Brazil’s trade deficits became unsustainable. During this period, the country was suffering from high unemployment and high debt. To counter this problem, Brazil adopted a number of measures.
In 2010, Brazil’s social policies aimed at achieving gender equality. The number of street children was just under 10 per cent, and 80% of them had a family connection and returned home at some point. Despite this positive step, some abuses continue to take place. The Federal Constitution calls on the family and society to ensure the rights of children.
Infra-constitutional legislation and social programmes aimed at providing social protection have contributed to this expansion. These policies also helped mitigate the pressures associated with economic liberalisation and inflation. Today, Brazil’s social policies have been lauded by many social actors in Africa. They have become a model for developing countries.
The government of Brazil has implemented a massive social policy, known as “Hunger Zero”. This plan, which covers over 11 million families, guarantees basic nutrition for all of them. The goal is to extend the program to all Brazilians in extreme poverty by the end of 2009. This project is a step in the right direction for Brazil.
A major goal of Brazil’s social policies has been to reduce regional inequality. Since returning to democracy, the country has implemented public policies to correct this imbalance. The government has introduced programmes to address this issue, including programs aimed at reducing infant mortality and illiteracy and increasing family farming. In addition, there have been measures to improve urban mobility.
Brazil’s social policies are often tied to environmental and governance policies. The government has changed the agency responsible for demarcating land for indigenous communities, for example. Previously, the justice ministry had been responsible for this, but this task has been passed on to the agriculture ministry. This is a governance issue, but it also highlights the need for social policies.
Brazil’s democratic transition was marked by a series of important reforms. The new government needed to balance its budget, implement market-oriented policies, and aggressively expand social inclusion. Through this transition, Brazil was able to achieve some growth and widen opportunity. The challenges of the process were many, but the result was a democracy that is rooted in social equity.
