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Brazil Economy Information

Brazil's economy took a turn for the better with the introduction of the Real during the presidency of Fernando Henrique Cardoso. After numerous years of hiperinflation, economic stability was brought to the country.

Brazil still has a long way to go but it has advanced far beyond the expectations of many. There was some speculation concerning the future of Brazil's economic stability with the election of Luis Ignacio "Lula" da Silva but the present government has continued to maintain inflation below 5%.

President Lula and his economic team have implemented prudent fiscal and monetary policies and have pursued necessary microeconomic reforms. Brazil's economy, aided by a benign international environment, grew approximately 2.8% in 2006 and 4.5% in 2007. Brazil is now a net creditor nation, and sustained growth, coupled with booming exports, healthy external accounts, moderate inflation, decreasing unemployment, and reductions in the debt-to-GDP ratio led two major rating agencies to give Brazil an investment-grade sovereign debt rating in early 2008.

However, significant vulnerabilities remain. Despite registering year-on-year declines from 2004 to 2007, Brazil's local currency debt remains high. Total tax burden is high, and income and land distribution remains skewed.

Sustaining high growth rates in the longer term depends on the impact of President Lula's structural reform program and efforts to build a more welcoming climate for investment, both domestic and foreign. In its first year, the Lula administration passed key tax and pension reforms to improve the government fiscal accounts. Judicial reform and an overhaul of the bankruptcy law were passed in late 2004, along with tax measures to create incentives for long-term savings and investments.

Legislation promoting public private partnerships, a key effort to attract private investment to infrastructure, also passed in 2004. Labor reform and proposals to increase autonomy for the Central Bank are pending. Despite this well-considered reform agenda, much remains to be done to improve the regulatory climate for investments, particularly in the energy sector; to simplify tax systems at the state and federal levels; and to further reform the pension system.

Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets.

From 2001-03 real wages fell and Brazil's economy grew, on average, only 2.2% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President LULA DA SILVA.

In 2004, Brazil enjoyed more robust growth that yielded increases in employment and real wages. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, all reinforced by a series of IMF programs.

The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment: in 2003 and 2004, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains - particularly in agriculture - also contributed to the surge in exports, and Brazil in 2004 surpassed the previous year's record export level and again posted a current account surplus.

While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003 - straining government finances - before falling as a percentage of GDP in 2004, while Brazil's foreign debt (a mix of private and public debt) is large in relation to Brazil's small (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable.

GDP (purchasing power parity): $1.492 trillion (2004 est.)

GDP - real growth rate: 5.1% (2004 est.)

GDP - per capita: purchasing power parity - $8,100 (2004 est.)

GDP - composition by sector: agriculture: 10.1% industry: 38.6% services: 51.3% (2004 est.)

Labor force: 89 million (2004 est.) Labor force - by occupation: agriculture 20%, industry 14%, services 66% (2003 est.)

Unemployment rate: 11.5% (2004 est.)

Population below poverty line: 22% (1998 est.)

Household income or consumption by percentage share: lowest 10%: 0.7% highest 10%: 48% (1998)

Distribution of family income - Gini index: 60.7 (1998)

Inflation rate (consumer prices): 7.6% (2004 est.)

Investment (gross fixed): 19.8% of GDP (2004 est.)

Budget: revenues: $140.6 billion expenditures: $172.4 billion, including capital expenditures of NA (2004)

Public debt: 52% of GDP (2004 est.)

Agriculture - products: coffee, soybeans, wheat, rice, corn, sugarcane, cocoa, citrus; beef

Industries: textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment

Industrial production growth rate: 6% (2004 est.)

Electricity - production: 339 billion kWh (2002)

Electricity - consumption: 351.9 billion kWh (2002)

Electricity - exports: 7 million kWh (2002)

Electricity - imports: 36.58 billion kWh; note - supplied by Paraguay (2002)

Oil - production: 1.788 million bbl/day (2004 est.)

Oil - consumption: 2.199 million bbl/day (2001 est.)

Oil - exports: NA

Oil - imports: NA

Oil - proved reserves: 13.9 billion bbl (2004 est.)

Natural gas - production: 5.95 billion cu m (2001 est.)

Natural gas - consumption: 9.59 billion cu m (2001 est.)

Natural gas - exports: 0 cu m (2001 est.)

Natural gas - imports: 3.64 billion cu m (2001 est.)

Natural gas - proved reserves: 221.7 billion cu m (2004)

Current account balance: $8 billion (2004 est.)

Exports: $95 billion f.o.b. (2004 est.)

Exports - commodities: transport equipment, iron ore, soybeans, footwear, coffee, autos

Exports - partners: US 20.8%, Argentina 7.5%, Netherlands 6.1%, China 5.6%, Germany 4.1%, Mexico 4% (2004)

Imports: $61 billion f.o.b. (2004 est.)

Imports - commodities: machinery, electrical and transport equipment, chemical products, oil

Imports - partners: US 18.3%, Argentina 8.9%, Germany 8.1%, China 5.9%, Nigeria 5.6%, Japan 4.6% (2004)

Reserves of foreign exchange and gold: $52.94 billion (2004 est.)

Debt - external: $219.8 billion (2004 est.)

Economic aid - recipient: $30 billion (2002)

Currency (code): real (BRL)

Exchange rates: reals per US dollar - 2.9251 (2004), 3.0771 (2003), 2.9208 (2002), 2.3577 (2001), 1.8301 (2000)

Fiscal year: calendar year

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