Economic Perspectives on Brazil
Economic Perspectives on Brazil

Economic Perspectives on Brazil

Over the past 30 years, Brazil has moved from the perpetually troubled Latin American giants to the world’s economic leaders. Now it ranks seventh in terms of GDP and demonstrates good growth rates compared to its neighbors in the table. In many ways, the country has achieved success thanks to its raw materials sector’s development and modernization, but not only.

Brazil is rich in many types of minerals. The key ones are oil and metal ores: iron, aluminium, nickel and copper. Minerals accounted for more than 35 per cent of total exports in 2012, which is estimated at $ 256 billion.

For a long time, it was believed that Brazil is relatively poor in oil. Until the end of the 2000s, domestic production did not cover its needs, let alone exports. The state oil company Petrobras produced oil from small fields located in different parts of the country.

That all changed after giant deposits were discovered in the Campos and Santos basins, several hundred kilometers off the coast of Rio de Janeiro and Sao Paulo, respectively. Their total reserves are estimated at 13 billion barrels and are regularly increasing with discoveries. Tupi, discovered in 2006 and later renamed Lula in honor of the former President of the country, Luis Inacio Lula da Silva, is considered the main field of both basins. On April 22, 2009, the first test commercial well was launched at the area, and on May 1 of the same year, it was solemnly opened. It currently produces about 100,000 barrels per day, but this figure is expected to grow significantly in the future. The total cost of developing the field is estimated at $ 50-100 billion.

While oil is a relatively new (on a large scale) energy source for Brazil, hydropower has been at a premium for the past half-century. The mighty Brazilian rivers have always been considered as objects for the construction of large hydropower plants.

Brazil is (together with Paraguay) the owner of the world’s largest hydropower plant, Itaipu, located on the Parana River. The dam began to be built back in 1971, and first gave current in 1984. It now supplies a quarter of Brazil’s electricity needs. Its capacity is less than the Three Gorges hydropower plant on the Yangtze in China, but it generates 10 per cent more energy.

The Brazilians continue to build up their electricity capacity gradually. Under construction is the Belo Monti hydropower plant on the Amazon tributary Xingu and two nearby rivers. Its ability will be slightly lower than that of Itaipu, but it will still be one of the world’s three largest hydroelectric power plants. The maximum height of the dams of this complex will be 90 meters.

Brazil’s desire to saturate its energy hunger conflicts with the wishes of the Indian tribes living in that part of the country where the cyclopean objects are being built. The construction of the Belo Monti hydropower plant was not without excesses. For example, in October 2012, about 80 tribal warriors broke into the territory where the building was underway, expelled workers from the construction site and seized the facility. They protested against the fact that as a result of the flooding of the territories of their place of residence, 20 thousand people would be deprived. The Indian government largely ignores the anger of the Indians.

Brazil cannot be considered only a raw material country. Although minerals constitute an important part of its wealth, this state’s economy is largely growing at the expense of industrial production based in several large cities. The economic capital of the country is located in the 20 millionth metropolis of São Paulo.

Brazil is actively developing several areas of the high processing industry at once. Embraer’s success makes Brazil one of the very short lists of developing countries with their civil aviation. Shipbuilding is also growing rapidly, which is directly supported by expanding oil production on the shelf.

The Maua shipyard in Niteroi, a suburb of Rio de Janeiro, manufactures oil tankers whose main task is to deliver oil from Petrobras’ fields in the Atlantic, both to the country’s ports and abroad.

The automotive industry in the country has been developing since the 1950s. In recent years, it has become one of the key sectors of the economy. In 2012, Brazil produced 3.3 million cars – about one and a half times more than in Russia. According to this indicator, Brazil is in second place in the Americas after the United States and 7th place globally. The country’s production is carried out by corporations such as Fiat, Volkswagen, Ford and Nissan. But local relatively small companies like Troller and Marcopolo also operate in the market. Brazil is one of the world leaders in flexible fuel vehicles, accounting for nearly one-fifth of its vehicle fleet.

The government encourages the development of high-tech industries. The Brazilian Silicon Valley in Campinas in São Paulo specializes in the manufacture of microelectronics, telecommunications products, and software. IBM, Samsung, 3M, Dell, Huawei and many others work in the valley.

Brazil is one of the most forest-rich countries in the world, thanks to the Amazonian jungle. The efficiency of using these resources often leaves much to be desired, since a significant part of the forest, for example, is burned for charcoal.

The charcoal industry not only destroys forests but also pollutes the air with coal-fired products. In addition, the additional release of carbon dioxide, according to some scientists, provokes acceleration of global warming.

Environmental issues were among the priorities in the election program of President Dilma Rousseff. However, so far, no great success has been achieved in this direction. Meanwhile, the selva’s destruction can cause an ecological catastrophe not even on a continental, but a global scale.

In recent years, Brazil has seen preparations for several major sporting events, including the 2014 FIFA World Cup and the 2016 Olympics in Rio de Janeiro. The government has announced a massive program for the construction of stadiums and associated infrastructure. Nevertheless, some objects may not be completed on time, and the building itself has caused widespread corruption.

The frenzied popularity of football in the country did not prevent tens of thousands of Brazilians from protesting against the country’s preparations for the World Cup in the summer of 2013. Most of the protesters did not object to the championship’s very fact, but they were outraged by the abuse and unprecedented theft in its organization.

Nevertheless, football in Brazil remains a favorite game and an important part of the economy. Thousands of Brazilians play professionally overseas, and the money that local teams receive for them is an integral part of the export. However, recently Brazilian football clubs have grown significantly rich. Some of them, such as the current holder of the Intercontinental Cup Corinthians from São Paulo, have become financially comparable to the European giants regarding their financial capabilities.

Brazil has long been considered an agricultural country, which has not changed even with the extensive development of the mining and processing industry. Coffee, sugar and meat are the main agricultural exports.

In terms of the number of head of cattle, Brazil is in first place in the world, slightly ahead of India, and in the number of pigs – in third place. The country is the main supplier of meat to the world market.

The year-round summer allows Brazilian farmers not to build heated cowsheds but to graze livestock on pastures constantly. In the hinterland of the country, animal husbandry is still semi-nomadic. The warm climate and surplus land provide a stable position for the country’s agriculture among competitors.

Among other agricultural resources of Brazil, it is worth noting, first of all, sugar cane. It is used not only for sugar production but also for ethyl alcohol production, which is actively used in the country as a fuel. Brazil is one of the few countries where the production of ethanol as a fuel is economically viable.

Despite the long predominance of agricultural production in the economy, Brazil has been and remains a country of cities. Almost a third of the country’s population lives in the largest metropolitan areas of the country. All this imposes a heavy load on the infrastructure, which is an amicable way to be updated only in relatively recent times.

Attempts by the authorities to eradicate poverty have so far met with limited success. Rio’s infamous favelas continue to be criminal centers as they were 40 years ago. Police actions in favelas sometimes resemble full-fledged military operations. Some of them introduce direct police or army rule.

At the same time, economic success has allowed the national middle class to grow substantially in size. Its consumption, in turn, becomes a guarantee of further growth of the country’s GDP. The middle class’s share in the total population is almost half of the country’s population (about 95 million people). Ninety-eight per cent of Brazilians own TVs, 96 per cent own refrigerators. About 30 million remain below the poverty line.

The rise in the number of Brazilians with average incomes has led to a construction boom in the country, which has become an additional economic growth engine. Both residential and commercial construction is growing steadily in volumes by several per cents per year.

The difference between favelas and common areas in Brazil is gradually blurring. Many favelas are becoming “ennobled” and are transformed into residential areas of the lower middle class. On the contrary, people from poorer regions find jobs and join the more prestigious neighborhoods’ ranks.

These processes are especially noticeable in the central cities – Rio and São Paulo. However, the most rapidly developing equatorial north of the country was previously considered a poor agricultural region. Now the most backward provinces are located in the interior of the continent.

Brazil remains one of the world’s tourism centers due to its fertile climate and unique Atlantic beaches. The development of this industry is hampered by the country’s relative remoteness from the traditional states – “suppliers” of tourists and a high level of crime. Nevertheless, the tourism business also regularly contributes to economic growth.

About Zahid Shaukat

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