The Rise of Brazil

by Viva Avasthi

1. Why has Brazil experienced such rapid economic growth?

The graph below (despite its confusing title) shows the real GDP growth of Brazil compared to the US and UK.

To see how Brazil compares to other countries, click the words 'Explore data' on the bottom right of the graph.



Through its combination of a young population, plenty of natural resources and a fairly robust political system, Brazil has managed to create and sustain a boost in its economic state. The rise of China (which will be explored later in the series, but has been already been explained by our author Chris Pearson here) contributed to Brazil's economic development as China had, and still has, a massive demand for commodities due to its sudden surge in manufacturing. (For a simple and effective explanation of what commodities are, click here.) Brazil's massive levels of exports of commodities to China leaves it slightly vulnerable as China's economic condition has a direct impact on Brazil's economy.

During the first decade after the Cold War, America's relations with Brazil drastically declined, which marked the beginning of the end of the US' influence over Latin America. This resulted in Brazil having more independence in its political and economic actions, which allowed it to expand without the somewhat oppressive and exploitative US hindering its progress.

Aside from its commodities exports, Brazil has a fairly well developed high-tech industry. Brazil has clearly made use of the resources it has, but it could be argued that it is overly dependent on exporting commodities. However, notable examples of other areas where Brazil does very well globally are ethanol production and the aviation industry.

Ethanol production

Brazil is the second largest producer of ethanol in the world after the United States. In 2010, Brazil produced 486,000 bbl/d of ethanol, up from 450,000bbl/d in 2009. A combination of high world sugar prices, a poor sugar cane harvest, and underinvestment caused a precipitous decline in ethanol production in 2011.

Source: http://www.eia.gov/cabs/brazil/Full.html, Last Updated: Feb. 28, 2012

Aviation industry 

Embraer is one of the world's main aircraft manufacturers.  

As Embraer's headquarters, [São José dos Campos] designs, manufactures, and provides after sales support to the commercial, executive, and defense aircraft market. 

Source: http://www.embraer.com/

For interactive graphs, visit:
http://www.embraer.com/en-US/ConhecaEmbraer/EmbraerNumeros/Pages/Home.aspx

The pie chart entitled 'Revenue Per Region' shows that only 17% of revenue for Embraer comes from within Brazil. Clearly, the largest market share is held by Europe and then by Asia Pacific, which indicates that the Brazil-based Embraer is a globally active business.


The Problems Facing Brazil

The obvious problem with Brazil's economy is that its growth has been largely based on its exports of commodities. However, as has already been mentioned, Brazil has also become a world leader in other industries, particularly the aviation and ethanol production industries. The question is whether Brazil has done enough to tackle its over-dependence on commodities...

Brazil’s economy, the 6th largest in the world, grew 2.7% in 2011. Growth slowed due to reduced demand for Brazilian exports in Europe and Asia, despite solid domestic demand and a growing middle class. 

Source: http://export.gov/brazil/doingbusinessinbrazil/index.asp

Some of the problems that Brazil currently faces were highlighted by one of the speakers from the lecture at Cambridge. It was mentioned by them that Brazil is having to tackle many problems similar to those the west is encountering. For example, the Brazilian Social Democratic Party allowed the construction of an arguably premature welfare system which lead to high wages having to be paid to workers. This, alongside the recent decline in Brazil's growth rate, has lead to the industries in Brazil becoming less competitive.

Another problem is that Brazil's education system is fairly poor, which means that its growth may not be completely sustainable. To allow industries to continue to flourish, they must be constantly provided with fresh talent. If a country's education system is poor, it can be difficult for it to continue to grow in the future as a result of its poorly educated population. On the other hand, if a country grows too quickly for the next generation to be trained effectively, this is also a form of unsustainable growth.

In the last edition of the International Program for Student Assessment (PISA), Brazil ranked 53rd among 65 countries...Eight percent of high school students have a technical-level degree in Brazil, compared to 42% in China and 37% in Chile...

Source: http://infosurhoy.com/cocoon/saii/xhtml/en_GB/features/saii/features/main/2011/02/03/feature-01

"2. How has this affected us?" and "3. How will this affect us?" will be answered as part of the final article of the series of six articles on the BRICS.

The second article of this series will be on the growth (or, more accurately, re-emergence) of Russia.