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Of Big ‘B’, balls, beaches!
Brazil has often been quoted as lagging behind other BRIC economies; the IIPM Think Tank shows why this might not be a long lasting view...
It is believed that soccer, beaches, and the carnival [Rio, for Salsa’s sake] wraps up Brazil’s romance and charisma. But an in-depth scrutiny of this country’s socio-economic profile will show that Brazil is more than just those. This Latin American country, after the predictions of Goldman Sachs BRIC report [we had to mention this, didn’t we!], has performed better than an upstart. Undoubtedly, like India, Brazil too is a large economy in its region, with high population growth, member of trillion dollar club, huge manpower and entrepreneurial spirit, this Big ‘B’ of BRIC is leaving no stone unturned to become the ‘Best among BRIC’.
Brazil had a very bleak past with black-spells of high debt, high oil prices, inflation, economic indolence and political drift. But then, after transition from a military ‘government’ to a democratic rule, Brazil successfully erased all the traces of high inflation & economic indolence and further opened its economy, apart from starting to resolve social sector issues. The country saw a new sunshine with poverty and inequality becoming lower. Even the leftist government under President Luiz Inácio Lula da Silva kept its promise of reviving the economy and further opened the economy. With around 200 million people, it’s impossible to ignore this emerging giant. The Goldman Sachs report BRICs and Beyond, published in 2007, states that this country is experiencing a modest 5.4% growth since 2007 along with bank rates going down to [only] 11.25% and consumer spending going up to 5%.
This growth rate may be a bit less than the growth rate of other BRIC counterparts, but then if one looks back, then in the 20th century itself Brazil had achieved a Chinese rate of growth. It’s no less than an achievement for a traditionally ‘middle-income bracket’ country to achieve such a steep growth rate. The Goldman Sachs report predicts Brazil’s 2015 GDP – relative to the US – to be around 6.5% but International Monetary Fund (IMF) projects that the GDP will be double of Goldman’s predictions by 2013. Even the debt held by the government has fallen to 42.2% of GDP.
Since 2004, the price of goods it exports is increasing by 11.5% every year. However, the inflation stood at 5.6% as of May 2008 [against the target of 4%], but it was all because of food inflation and will not pose any great threat in future as the country is the world’s largest exporter of wheat and soya. One-third of Chinese grains are imported from Brazil; and even India and Russia largely depend on Brazil for food grains. Thus, the revenues obtained will easily shoot up Brazil’s GDP and in no time it could catch up with BRIC report projections.
What’s more, within no time, Brazil has appeared as an oil giant not only in the western region but within the world too. The Goldman Sachs’ report further talks – correctly this time – about the oil richness of the country. Brazil uses ethanol [sugarcane ethanol and bagasse accounts for 46.4% of total renewable energy production and ethanol accounts for 16% of energy output] as fuel for its domestic consumption; thus, most of the oil extracted is left for exports. If the latest studies are to be trusted, Brazil may well have discovered reserves of around 90 billion barrels of oil in the Atlantic. With the global price rise of oil and food, this could be quite a unique asset.
The resilience of the economy emanates from its trade surplus and macro-economic strategies. Since 2003, Brazil is maintaining a new record of trade surpluses. As per June 2008, the balance of trade [exports minus imports] testifies a surplus of $2.719 billion. For FY 07-08, trade surplus reached $11.370 billion, with foreign ‘sales’ at $90.645 billion and imports at $79.275 billion as per the latest data available. After the privatisation of companies like Vale [world’s second-biggest mining company; the world’s biggest exporter of iron ore] and Embraer [third-largest maker of civilian aircraft], FDI touched a new height last year with $34.6 billion coming in; the FDI is growing by a staggering 84%. The Brazilian stock market index rose by 71% [even faster than that of India]: this can be attributed to the two biggest stocks – Vale and Petrobras [made the world’s second-largest oil discovery].
By:- Sray Agarwal
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