Brazil

Brazil’s macro economic situation before 2011

During the past decade, Brazil had a government that focused on keeping inflation from shooting up, reducing unemployment and raising amount of money workers would earn. AS for the new president, his “major priorities of his administration included reforming social security, pension and tax policy, combating hunger and poverty, and enhancing educational opportunities, particularly for poor children”. With the reforms that have been put into place, Brazil had a superb ten years of economic growth. ( E. Bradford Burns, 2015)
In 2006, the president Lula “enacted reforms to increase public investment and control spending. Agricultural and mining operations persistently expanded, and foreign investors and major trading partners showed renewed interest in the country”. Since 2003, nearly 40 million Brazilians were lifted out of poverty, joining the ranks of the middle class and buying consumer items like televisions and cars. This in turn spurred more economic growth culminating in a 7.5% GDP growth rate in 2010 that was the country’s best economic performance in 25 years. But since 2010, Brazil’s economic growth, though still on the positive side, has been declining. (E. Bradford Burns, 2015)

The gross domestic product (GDP) in Brazil was worth 2476.69 billion US dollars in 2011, according to a report published by the World Bank. The GDP value of Brazil is roughly equivalent to 3.99 percent of the world economy. Historically, from 1960 until 2011, Brazil GDP averaged 469.51 billion USD reaching an all time high in December 2011. The GDP is the measure of national income and output for a given country. (World Bank, 2015)

The inflation rate in Brazil was recorded at 7.31% in September 2011. Inflation refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of inflation are the CPI, which measures consumer prices, and the GDP deflator, which measures in the whole of the domestic economy. (Trading Economics, 2015) In Brazil, the components of the CPI are: food and beverages, transport, housing household goods, health care, personal expenses, communication and education. Brazil has had a colorful past, and over the last three years the inflation rate has been relatively stable. In 1994 government introduced “Real Plan” to lower the inflation rate significantly and so it helped to both stabilize the economy and improve the living standards of many people in Brazil. “Real Plan” did not center on simply freezing wages and other prices; it focused on removing the process of identification.(Sao Paulo, 2014)

Unemployed persons in Brazil decreased to 1.4 million persons in September of 2011 from 1.5 million in June 2011. Historically, from 2002 until 2011, Brazil unemployed people averaged 2.01 million persons reaching an all time high of 2.82 million persons in April 2004 and a record of low of 1.13 million in December 2011. In Brazil, unemployed persons are individuals who are without a job and actively seeking to work. The effect of high unemployment caused many social repercussions, in that there were high crime rates and much social unrest. However there has been positive trend in the reduction of unemployment, as seen in the Figure 3. (Trading Economics, 2015) Since unemployment levels have decreased, more households would have a disposable income. This in turn, means the households spend and consume more, which has a direct effect on industries and firms. Thus, in the long run, Brazil is moving towards achieving its potential GDP.(Herwin Loman, 2014)

Brazil reported a trade surplus equivalent to 3896.37 million USD in July 2011. Historically, Brazil reached the best surplus at 5659.40 Million USD in July 2006. Brazil has an export-oriented economy. (Trading Economics, 2015)The main exports are transport equipment, iron ore, industrial raw materials, soybeans, footwear, coffee, autos, automotive parts and machinery. Brazil imports machinery, electrical and transport equipment, chemical products and electronics. The primary trading partners of Brazil are The United States, European Union and Argentina. (Herwin Loman, 2014) Brazil has increased its exports, as its exports become less competitive and Brazilians can afford more foreign goods.

Appendix A

Figure 1.

Figure2.

Figure 3.

Figure 4.

Figure 5.

Reference List

1. E. Bradford Burns. (2015). Brazil since 1990. Available: http://www.britannica.com/EBchecked/topic/78101/Brazil/272268/Brazil-since-1990. Last accessed 21st Feb 2015.
2. WorldBank. (2015). Brazil GDP. Available: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD/countries/BR?display=graph. Last accessed 22 Feb 2015.
3. Trading Economics. (2015). Brazil inflation rate. Available: http://www.tradingeconomics.com/brazil/inflation-cpi. Last accessed 22 Feb 2015.
4. Trading Economics. (2015). Brazil Balance of Trade. Available: http://www.tradingeconomics.com/brazil/balance-of-trade. Last accessed 26th Feb 2015.
5. Herwin Loman. (2014). Brazil’s macro economy, past and present. Available: https://economics.rabobank.com/publications/2014/january/brazils-macro-economy-past-and-present/. Last accessed 26th Feb 2015.
6. Trading Economics. (2015). Brazil Unemployed persons. Available: http://www.tradingeconomics.com/brazil/unemployed-persons. Last accessed 24th Feb 2015.
7. Sao Paulo. (2014). The echoes of 1994. Available: http://www.economist.com/blogs/americasview/2014/07/real-plan. Last accessed 7th Mar 2015.